Ntt Data Hong Kong Ltd v. Octo3 Ltd and Another

HCA 3446/2016

[2018] HKCFI 325

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3446 OF 2016

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BETWEEN

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AND

HCA 44/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 44 OF 2017

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BETWEEN

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D E C I S I O N

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Background

1.This is an application made by NTT Data Hong Kong Limited (“NTT”) as plaintiff for summary judgment to be entered against Octo3 Limited (“Octo”), the 1^st defendant named in HCA 3446/2016 (“3446”).  NTT originally sought a further order under Order 14A, for Octo’s defence to be disposed of on a point of law without trial, but at the hearing, Counsel confirmed that NTT was content to proceed simply under Order 14 for summary judgment.  NTT’s application is opposed by Octo.

2.Shortly after the commencement of 3446 on 30 December 2016, separate proceedings were instituted by Octo as plaintiff against NTT as defendant under HCA 44/2017 (“44”), relating to the same underlying dispute.  NTT also applied for summary judgment to be entered on its counterclaim against Octo in 44.  After NTT issued its application for summary judgment, Octo applied in August 2017 for the trial of 3446 to be heard at the same time together with, or immediately after the trial of 44.

3.NTT and Octo were parties to a Software Licence Agreement dated 3 December 2015 (“Agreement”), whereby Octo agreed to grant to NTT a non-exclusive, non-transferable licence to use software systems and modules which were listed in Appendix 1 to the Agreement (“Licensed Products”), for a term of 5 years, subject to the terms and conditions set out in the Agreement and, in particular, NTT’s payment of licence fees of US$4.7 million (“Licence Fee”).  The Licensed Products were for use in and for NTT’s business of providing payment services for online businesses.  Octo was at all material times a provider of transactional solutions and supporting services for online businesses, and the Licensed Products were developed by Octo and licensed to NTT under the Agreement.

4.The 2^nd defendant named in 3446 is Mr Tyrone Lynch (“Lynch”), who was formerly the Senior Vice President of NTT Com Asia Limited (“NTT Asia”), a related company of NTT within the NTT Group of companies.  Lynch was the key employee of NTT Asia who had negotiated and concluded a platform hosting agreement dated 2 May 2014 (“Platform Hosting Agreement”) which was signed between Octo and a subsidiary of NTT Asia.  Such Platform Hosting Agreement was for Octo to provide software to support a new online payment system (“Payment System”) that was implemented by the NTT Group in Hong Kong.  Lynch was the employee who was involved in the development of the Payment System, and who was responsible for formulating a business plan in respect of the Payment System and negotiating with Octo in respect of the agreements and cooperation between Octo and NTT Asia. 

5.The Platform Hosting Agreement was subsequently novated to NTT, together with the transfer of Lynch’s employment contract from NTT Asia to NTT, in order to facilitate the continued development of the Payment System of the NTT Group.  Lynch became the Chief Executive Officer (“CEO”) of the “Payments Business” division of NTT, and was designated by the steering committee of NTT to be the person responsible for the promotion and development of the business of payment service providers for e-commerce customers in the Asia-Pacific region (“Business Development”). 

6.A key part of the Business Development was to negotiate and enter into a software licence agreement with Octo, for the use of Octo’s software for a term of 5 years.  Lynch was apparently in charge of this, and it was in reliance on his recommendation that the steering committee of NTT finally approved the execution of the Agreement with Octo.  It is not disputed that the negotiations for the Agreement between NTT and Octo were conducted by Lynch on behalf of NTT.

7.The Agreement was signed by Lynch on behalf of NTT on 3 December 2015.  Shortly after that, Lynch acting on behalf of NTT negotiated and agreed with Octo for a “grace period” under the Agreement for the delivery of the Licensed Products, pending NTT’s move to, and plans to set up the data centre of the NTT Group in Thailand.

8.Save for the effect of the agreement on the “grace period”, there appears to be no dispute as to the background facts outlined above.  Nor is it disputed that Lynch formally left NTT’s employment in September 2016.  What was controversial and became the subject of the legal proceedings was that Lynch came to be employed as the CEO of Octo on 1 October 2016, and was appointed a director of Octo on 4 November 2016. 

9.NTT claims that by employing Lynch, Octo was in breach of clause 13 of the Agreement, and that as a result of such breach, NTT was entitled under clause 12 of the Agreement to terminate the Agreement on the ground of Octo’s material and irremediable breach of its obligations under the Agreement.

10.Clause 13 of the Agreement states:

“NON-SOLICITATION

(NTT) and (Octo) agree not to solicit or engage any employees of the other who had been engaged in the performance of the other’s obligations under this Agreement and the Attachments without the prior written agreement of the other. This prohibition shall continue for a period of twenty-four (24) months from the date of this Agreement or any Attachment whichever is the later.” (Emphasis added)

11.Clause 12.1 (i) provides that the Agreement, and the licence to use the Licensed Products granted, may be terminated by either party on written notice, if “the other party is in material breach of its obligations” under the Agreement.

12.On 30 December 2016, NTT commenced 3446 against Octo as 1^st defendant and Lynch as 2^nd defendant, relying on Octo’s breach of clause 13 of the Agreement, and Lynch’s breach of his duties owed to NTT as a director.  By way of relief, NTT seeks in 3446 a declaration that the Agreement had been validly terminated by a notice of termination served by NTT on Octo on 15 November 2016, and that Octo was in repudiatory breach.  Further, NTT seeks a refund of a sum of US$2,350,000 (“Upfront Payment”) which it had paid to Octo upon signing of the Agreement on 3 December 2015, as 50% of the Licence Fee and in accordance with the payment schedule set out in Appendix 1 to the Agreement. 

13.In its Defence filed for 3446, Octo claims that Lynch had resigned from NTT on 18 July 2016, and did not become a CEO of Octo until 1 October 2016.  This is not disputed by NTT, as Lynch was on garden leave from 1 August 2016 until his last working day with NTT which was 17 September 2016.

14.Octo alleges that there is no breach of clause 13: that Lynch was not involved in NTT’s performance under the Agreement, that Octo had not solicited Lynch to join Octo, and that Octo’s hire of Lynch was “regular, proper, at arm’s length and in the ordinary course of business”.  Octo claims that there was no valid termination of the Agreement by NTT for lack of any material breach on the part of Octo, and further, that there was no effective notice of termination. 

15.There is no counterclaim made by Octo in 3446, but on 9 January 2017, before filing a defence in 3446, Octo commenced 44 against NTT.  In 44, Octo relies on the same Agreement, and claims payment of the balance of the Licence Fee, in the total sum of US$2,350,000, together with damages for NTT’s breach of the Agreement in failing to make payment of the 2^nd and 3^rd installments of the Licence Fee.  Further, Octo claims damages on a quantum meruit basis for professional services allegedly rendered under the Agreement.

16.A defence was filed by NTT in 44, in which NTT claims that Octo was in breach of clause 13 of the Agreement by appointing Lynch as its director and CEO without NTT’s knowledge or approval.  NTT further counterclaims for the same relief it seeks in 3446.

17.Apart from the joinder of Lynch as 2^nd defendant in 3446, 44 and 3446 deal with the same factual matters relating to the Agreement and Octo’s appointment of Lynch, and raise the same issues concerning the parties’ liability for breach of the Agreement, NTT’s entitlement to refund of the Upfront Payment, and Octo’s entitlement to the Licence Fee. 

18.NTT claims, as against Octo only, that summary judgment should be entered in its favor in 3446, and on its counterclaim in 44, and that Octo’s claims made against NTT in 44 should be struck out as disclosing no cause of action, being frivolous or vexatious, or as an abuse of process.

19.On its part, Octo claims that there are triable issues as to the construction of clause 13, and whether there is a material breach to form the basis of NTT’s termination of the Agreement under clause 12, such that this is not a case for summary judgment.  Octo resists the striking out of 44, on the basis that there is no obligation on its part to raise its claims against NTT under the Agreement by counterclaim in 3446, instead of issuing separate proceedings.  It justifies its doing so on the basis that it does not wish to delay its claims against NTT for the Licence Fee, when 3446 is complicated by NTT’s claims against Lynch, and against Octo under clauses 13 and 12 of the Agreement.

Are there triable issues regarding breach of clause 13?

20.The dispute in 3446 (and 44) turns on the construction of clauses 13 and 12 of the Agreement.  Construction of contracts is a question of law, but a question of law may still be determined in the course of the usual summary judgment procedure (para 14/4/12 Hong Kong Civil Procedure, and the cases cited therein).  If the point is clear, and the court is satisfied that the question of law raised by way of defence is unarguable and there are no issues of fact between the parties, leave to defend will be refused, and summary judgment may be entered.

21.NTT claims that there is a clear breach of clause 13.  Lynch was the key personnel of NTT who was responsible for and was involved in negotiating and implementing the Agreement throughout his employment by NTT as the CEO of the Payments Business of NTT.  There is no dispute that he was employed by Octo as its CEO and director, with effect from October 2016. 

22.According to NTT, it is indisputable that Lynch was engaged in the performance of NTT’s obligations under the Agreement.  It was Lynch who had formulated the business plan for NTT’s new Payment System, which eventually formed the subject matter of the Agreement.  He negotiated the Agreement with Octo, and signed the Agreement on behalf of NTT.  After the execution of the Agreement, Lynch was the key employee responsible for the performance of NTT’s obligations under the Agreement, which performance included his signing of the cheque for NTT’s Upfront Payment of the Licence Fee, discussing with Octo the timetable for the implementation of the licence and the migration plan for installation of the software and the other Licensed Products in the data centre in Thailand, pursuant to the Agreement.  He negotiated and agreed the grace period with Octo for delivery of the Licensed Products.

23.On behalf of Octo, it was argued that there are questions of fact to be investigated, as to what steps were taken by NTT to discharge its obligations under the Agreement, Lynch’s involvement in those steps, and then, the question of law arises as to whether Lynch’s involvement constitutes performance of NTT’s obligations under the Agreement within the meaning of clause 13. 

24.Lynch’s signing of the cheque is evidenced by his signature on the copy of the cheque produced in evidence.  There is no dispute raised as to his signature.  Nor has Octo in its evidence raised any dispute that Lynch was involved in the negotiations for the Agreement and for the grace period, which is evidenced by the emails produced.  In resisting an application for summary judgment, a defendant has to condescend to particulars and state clearly and concisely what facts are relied upon to support its defence.  It is trite, that:

“A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism.”

25.Octo further argued that none of the acts relied upon by NTT to show Lynch’s involvement amounted to his engagement in the “performance” of NTT’s obligations under the Agreement, within the meaning of clause 13.  The signing of the cheque was said to be a purely administrative act.  The negotiations for the grace period amounted to postponement of performance under the Agreement, rather than performance itself. 

26.I reject these arguments.  As highlighted by Counsel for NTT, the main and primary obligation of NTT under the Agreement was the payment of the Licence Fee, the consideration for the licence granted under the Agreement.  Lynch’s signing of the cheque for the Upfront Payment constituted NTT’s performance under the Agreement.

27.Leaving aside the dispute between the parties as to the effect of the grace period and whether it delayed commencement of the term of the licence, even on Octo’s case, the grace period postponed the installation of the Licensed Products under the Agreement.  It cannot be disputed that it was Octo’s obligation under the Agreement to deliver the Licensed Products, and NTT’s incidental obligation to accept delivery of the Licensed Products, as well as to render assistance to Octo for the Licensed Products to be delivered and installed in accordance with the Agreement.  Negotiating and agreeing on the timetable and logistics for the delivery and installation of the Licensed Products, at the designated site within the Territory of the Agreement (which extends to Thailand) is significant to both parties’ performance under the Agreement.  In the absence of agreement on the date and location for the installation of the Licensed Products, there would be dispute as to non-performance, and arguments as to whether the parties were in breach of their obligations under the Agreement.  Lynch played a key role in such negotiations and ultimate agreement on the grace period, which amounted to performance of NTT’s obligations under the Agreement.

28.Finally, it was argued on behalf of Octo that before the Court can decide whether Lynch’s acts constituted performance of NTT’s obligations under the Agreement within the meaning of clause 13, the Court should consider all facts comprising the factual matrix of the Agreement, so as to ascertain the parties’ intentions at the time of the Agreement and the purpose of the prohibition contained in clause 13.  Counsel relies on Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351, and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, in emphasizing the importance of context in the exercise of contractual interpretation.

29.Counsel for Octo argued that the word “performance” has a constant meaning, and is capable of encompassing a wide range of activities, such that the Court is entitled to have regard to the commercial purpose of the Agreement and of Clause 13, in construing “performance” within the meaning of the clause.  Counsel for Octo maintained that there is insufficient evidence at this stage to enable the Court to ascertain such commercial purpose, apart from the argument raised by Counsel for NTT that one of the commercial purposes of clause 13 is to protect confidential information from being leaked by an employee. 

30.Notwithstanding Octo’s apparent emphases on the context and purpose of the Agreement, it has not, in any of the affidavits filed in opposition to the application for judgment under Order 14 and Order 14A, referred to any factual matters which are said to be relevant to the context of the Agreement, nor to what it claims to be the purpose of the prohibition in clause 13.  As pointed out in paragraph 24 above, it is for Octo to condescend to particulars, but it has failed so to do.  If there were indeed facts relevant to the factual matrix, context, commercial purpose or objective of the Agreement or of clause 13, no doubt Mr Samuel of Octo would have alluded to them in the 2 affidavits which he made.  On the available evidence, I fail to see what further facts can be put before the Court at trial, to assist its construction of the Agreement, apart from what is already set out in the pleadings and in the affidavits and affirmations already made.

31.The words in clause 13 are plain and clear enough, but to the extent that it is relevant to consider the commercial purpose of clause 13, it is easy to envisage and appreciate such purpose.  It would obviously be prejudicial to a contracting party if its employees engaged in the performance of its obligations under an agreement should be recruited by the counterparty.  As counsel for NTT pointed out, confidential information of the party’s business operations and finances might be disclosed to the other party.  In NTT’s particular case, the level of licence fees it can afford or would be prepared to pay would be relevant to the services Octo would be prepared to perform under the Agreement and the Appendices, and upon negotiation of the licence fees and other terms for any renewal of the licence.  Apart from that, a contracting party’s performance of any contract would be disrupted, if its employees who are trained in or familiar with the implementation and performance of the contract were recruited by the counterparty.  Indeed, the loss of employees who have information and knowledge of the initial negotiations of the contract and of the performance of the counterparty would be materially prejudicial, when it becomes necessary to consider whether the counterparty is properly discharging its obligations, or is in breach of what had been agreed.  A covenant not to engage each other’s employees who perform the obligations under the contract makes perfect commercial sense.

32.It is also relevant to bear in mind that the construction of clauses 13 and 12 of the Agreement is in the context of whether Octo is in breach by employing Lynch, and whether Lynch was engaged in the performance of NTT’s obligations under the Agreement.  The Court is not construing clause 13 in the context of the abstract acts of any other junior member of staff of NTT, and whether such acts constitute NTT’s “performance”, or whether any other breach (apart from Octo’s engagement of Lynch) is material.

33.As CEO of NTT’s Payments Business, the key person in charge of the Payment System being developed and implemented by NTT, and the person who had negotiated the Agreement with Octo, Lynch’s acts in: (1) signing the cheque for the Upfront Payment of the Licence Fee, pursuant to Appendix 1 to the Agreement; and (2) his discussion and negotiation with Octo after the signing of the Agreement to agree on the timetable for the delivery of the Licensed Products, all constitute Lynch’s engagement in the performance of NTT’s obligations under the Agreement, within the meaning of clause 13.  To the extent that it is suggested by Octo that clause 13 should be construed to prohibit the employment only of someone from NTT “who was materially involved in the performance of NTT’s obligations under the Agreement”, I consider that Lynch was such a person.

34.The assertions made by Octo, that it had not solicited Lynch, that Lynch was employed “on merit”, and that the process of recruitment was regular, proper, at arm’s length and in the ordinary course of business, are irrelevant to the question of whether there was a breach of clause 13.  The covenant contained in clause 13 is that Octo would not “engage” NTT’s employees who were engaged in the performance of NTT’s obligations.  Octo’s employment of Lynch constituted an engagement in breach of its covenant.

35.In relation to NTT’s claim of Octo’s breach of clause 13, I consider that there is no serious or material factual dispute which gives rise to any arguable defence.  Determination of Octo’s breach of clause 13 is separate to and does not depend on whether Lynch is in breach of his fiduciary duties and duties of confidentiality owed to NTT.

Are there triable issues as to termination of the Agreement under clause 13?

36.On behalf of Octo, it was argued that even if there was a breach of clause 13, it was not a “material breach” so as to entitle NTT to terminate the Agreement, in reliance upon clause 12.1(i).  In paragraph 34 of Mr Samuel’s affidavit of 13 November 2017, he claimed that any breach by Octo of clause 13 was not a material breach of the Agreement, as the main purpose of the Agreement was to grant to NTT a licence to install and use the Licensed Products.

37.Both parties have urged the Court to consider the commercial purpose of the Agreement, and of clause 13, in determining whether there was a breach.  I have found that Lynch was a senior and key employee of NTT, who was involved and engaged in the performance of NTT’s obligations under the Agreement.  Bearing in mind all the conceivable commercial purposes of clause 13 (alluded to in paragraph 31 above), including the need to protect not only the parties’ confidential information relating to their businesses and business needs, but also general information relating to each party’s manner of performance of the Agreement, I consider that Octo’s breach of the covenant contained in clause 13, by its employment of Lynch, constitutes a material breach which entitles NTT to terminate the Agreement. 

38.It is true that the main purpose and objective of the Agreement is for Octo to grant, and for NTT to obtain the right to use the Licensed Products.  The attainment of that very purpose and objective would be prejudiced and affected in a material way, if a senior and key employee engaged in and familiar with the manner of performance of NTT’s obligations under the Agreement is “poached” and/or recruited by Octo.  Some other employee or employees would have to replace the senior employee, and to familiarize themselves with the operations under the Agreement, with inevitable delay.  As NTT sought to emphasize, the senior employee might disclose to Octo confidential and other information relevant to NTT’s performance under the Agreement.  I do not agree that NTT has to particularize the precise confidential information which it seeks to protect, as it has to do for bringing an action against Octo for breach of confidence or use of confidential information.  NTT has not made any claim against Octo in 3446 (nor in its counterclaim in 44) for breach of confidence.  In this context, the Court is not seeking to ascertain whether the information at risk of disclosure (in the event of an employee of NTT being employed by Octo) has the quality of confidentiality, to justify protection.  Rather, it is the purpose and objective of the Agreement and of Clause 13 which is being considered, the disclosure of confidential information being one of such possible commercial objectives, for determining whether Octo’s engagement of Lynch is a material breach of the Agreement.  It is not necessary for the details of the alleged confidential information to be particularized and examined, as a reason for trial, as opposed to summary judgment being entered. 

39.Again, Octo’s counsel has referred to the relevance of the factual matrix of the Agreement, and the alleged need to construe “material” as used in clause 12 in the context of the case.  As set out in the earlier parts of this Decision, Octo has not referred to any part of the factual matrix as being relevant to the construction of clause 12 or the Agreement, or explained how it is said to be relevant to the question of whether Octo’s employment of Lynch is a material, or immaterial, breach.  The role played by Lynch in NTT’s performance of the Agreement has already been particularized in paragraph 6 of the 2^nd affirmation of Mr Kawamoto of NTT.  The only explanation offered by Octo is that Lynch was employed on merit, and at arm’s length.  I do not agree that there will be further materials at trial, which are not contained in the evidence already filed to date, and which can be relevant to the construction of clause 12.

40.In Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd [2013] EWCA Civ 200, the court explained “material breach” as one which is more than trivial, but need not be repudiatory.  In Dalkia Utilities Services Plc v Celltech International Ltd [2006] 1 Lloyd’s Rep 599, the court held that the claimant was entitled to terminate for material breach of its obligation to pay, because the sums involved were neither trivial nor nominal, and that the continued failure to pay was serious. Given the central role played by Lynch in NTT, I consider that Octo’s engagement of Lynch was a serious breach of a condition in the Agreement, which breach is neither trivial nor minimal.

41.In my judgment, there is no arguable defence or triable issue as to whether Octo was in material breach, within the meaning of clause 12, as a result of its engagement of Lynch.

Any triable issue as to the notice of termination?

42.By a letter dated 15 November 2016 from NTT’s solicitors (“15/11 Letter”), written notice of termination of the Agreement was served on behalf of NTT on Octo.  The 15/11 Letter was unequivocal in terms, giving notice to Octo that the Agreement was terminated with immediate effect pursuant to clause 12.1(i), by reason of Octo’s engagement of Lynch as its CEO without NTT’s prior agreement, in material breach of clause 13.

43.The only dispute raised by Octo in relation to the 15/11 Letter is that it was marked “Without Prejudice” and, as such, is inadmissible as evidence. 

44.There is nothing in the 15/11 Letter which constitutes a bona fide attempt to settle a dispute between NTT and Octo.  Nor is there any evidence that there were at the material time negotiations taking place between the parties to resolve any matter in dispute.  The 15/11 Letter only asserts NTT’s rights to terminate the Agreement, and Octo’s breach of clause 13.  The only mention of dispute resolution is in the penultimate paragraph of the 15/11 Letter, but that refers to NTT invoking the dispute resolution procedures under the Agreement, to deal with “all post termination matters” including the cancellation of invoices, refund of the Upfront Payment and a meeting to resolve these matters following termination of the Agreement.  Despite the use of the heading “without prejudice”, such assertion of NTT’s rights under the Agreement, with no offer to negotiate or settle, is not privileged (Buckinghamshire CC v Moran [1989] 2 All ER 225). 

45.In any event, as Counsel for NTT pointed out, NTT’s reliance on and the relevance of the 15/11 Letter lies not in the truth of any fact which is asserted or admitted in the 15/11 Letter, but in the fact that it was made, ie that the 15/11 Letter was issued by NTT, in exercise of its right to terminate the Agreement pursuant to clause 12.  As such, the public policy aspect of the rule against admission of without prejudice correspondence does not apply to the 15/11 Letter (Muller v Linsley and Mortimer [1996] PNLR 74). 

46.Further, it is not disputed that another open letter was issued on behalf of NTT on 30 November 2016, reiterating that the Agreement was terminated on 15 November 2016.  In my view, it is indisputable that NTT had exercised its right to terminate the Agreement under clause 12 in November 2016. 

Any triable issue as to relief sought by NTT?

47.As I have found that Octo was in breach of clause 13, and that NTT had effectively terminated the Agreement under clause 12 on the ground of Octo’s material breach, the declarations can be made in the terms sought in paragraphs (AA) and (BB) of the prayer to the Re-Amended Statement of Claim (“SOC”) in 3466.

48.NTT claims that it is entitled to seek a refund of the Upfront Payment (as pleaded in paragraph 33 of the SOC), on the ground of restitution and unjust enrichment, and that the consideration for the Upfront Payment had totally failed.  This is based on its pleading in paragraph 32A of the SOC, that prior to the termination of the Agreement, there had been no delivery of any of the Licensed Products by Octo to NTT.

49.Octo argued that there is no pleading of unjust enrichment. 

50.Reading paragraphs 32A and 33 of the SOC, I agree with NTT that the material facts supporting the claim for the refund of the Upfront Payment have been pleaded.  It has been pleaded that the Upfront Payment had been made, but that the Licensed Products had not been delivered, and that NTT is entitled to seek a refund.  It cannot be suggested that Octo was in any way taken by surprise by NTT’s claim for refund, now justified on the basis of restitution, or unjust enrichment.  Octo does not dispute that the software comprising the Licensed Products had not been delivered, although it claims that this was not due to any fault on the part of Octo, but was the result of NTT’s decision to move the place of installation to Thailand.  It was further argued on behalf of Octo that despite the fact that the Licensed Products had not yet been delivered, NTT had received consideration and benefit in the form of having been granted a licence under the Agreement.  Accordingly, it was argued that there was no total failure of consideration, to justify a refund of the Upfront Payment.

51.It was in this context that Octo argued that notwithstanding the grace period agreed, it was only to postpone the date of delivery of the Licensed Products, but did not have the effect of postponing the commencement of the licence granted under the Agreement.  According to Octo, the 5 year period of the licence “commences from the point of delivery or four months from execution of (the Agreement), whichever is earlier” - as provided for in Appendix 1 of the Agreement.  On Octo’s case, the period of the licence commenced on 3 April 2016, 4 months from signing of the Agreement on 3 December 2015.  According to Octo, NTT had obtained the benefit of the licence, notwithstanding the postponement of delivery of the Licensed Products, and there was no total failure of consideration to justify the refund of the Licence Fees.

52.The entire basis of the licence granted under the Agreement is for NTT to use the Licensed Products.  If, as it is accepted by Octo, the Licensed Products had not been delivered or installed, I fail to see what use NTT could have made of the software comprising the Licensed Products, and what benefit the licence could have conferred on NTT. 

53.Counsel for Octo also argued that delivery of the Licensed Products should be deemed to have taken place on 1 September 2016. This was in reliance on a letter dated 1 September 2016, which Octo unilaterally served on NTT, informing NTT that due to the delay in the installation of the Licensed Products as a result of NTT’s decision to move the installation to Thailand, Octo considered 1 September 2016 as the delivery date of the licence “for all practical purposes”, and that support and maintenance under the Agreement would start from that date.  There is no assertion by Octo that NTT had agreed to this date.

54.I accept the submissions made on behalf of NTT, that there is no provision in the Agreement which entitles Octo to unilaterally impose and dictate a delivery date, apart from and otherwise than in accordance with clause 3.2 or Appendix 1 of the Agreement.  Under clause 3.2, delivery of the Licensed Products is “deemed to have occurred on the date on completion of installation or upon (NTT’s) use of the Licensed Products or part thereof, whichever occurs first”.  There is no evidence, or assertion by Octo, that installation, or NTT’s use, of the Licensed Products had at any time been completed or taken place.  Similarly, under “Licence Fees”, Appendix 1 to the Agreement states that the licence period of 5 years commences from the point of delivery or 4 months from execution of the Agreement, whichever is earlier.  That does not entitle Octo to specify 1 September 2016 as the “deemed date of delivery”.

55.Finally, Octo alleges that it had rendered professional services to NTT, pursuant to the Appendices to the Agreement.  Under Appendix 1, NTT may, at its option, require Octo to provide support services provided that it exercises such option by service of notice in writing on Octo. Under Appendix 4, NTT may also, at its option, require Octo to provide management support services, but Appendix 4 expressly provides that both parties are required to enter into a separate detailed agreement for such services.  Under Appendix 6, Octo is required, upon NTT’s request, to provide professional services, the scope of which was to be determined after mutual discussion and agreement.  NTT denies that there was any agreement made with Octo pursuant to the Appendices, in respect of any professional or support services to be provided by Octo, and to be paid by NTT.

56.In any event, it is pertinent that there is no counterclaim in 3446 for NTT’s payment of any charges for services rendered by Octo, or for set-off of these charges against NTT’s claim for the Upfront Payment and damages.

57.For the above reasons, I am prepared to grant summary judgment against Octo on NTT’s claims in 3446 for its refund of the Upfront Payment, together with interest.

58.NTT’s counterclaim against Octo in 44 is in identical terms and for identical relief as those in 3446.  As I have found that Octo has no arguable defence to NTT’s claims, judgment should be entered in favor of NTT on its counterclaim in 44.

Whether 44 should be struck out or dismissed

59.I maintain the view that it was totally unnecessary for Octo to issue separate proceedings by 44, to seek payment from NTT of any charges  it claimed to be payable under the Agreement.  The institution of 44 was totally contrary to the objectives of the CJR, with its emphases on promoting procedural economy, cost-effectiveness and fair distribution of the resources of the Court. It was a waste of legal costs to have 2 separate proceedings on the same subject matter, to seek identical relief to that which was sought or could have been sought in 3446.  The proclaimed excuse, of avoiding delay, does not justify the institution of separate proceedings, when Octo’s claims could have been raised by counterclaim, and there is more than ample armory under the Rules of the High Court for Octo to proceed with its counterclaim expeditiously if it so wished to do.  Octo’s application on 15 August 2017, for the trial of 3446 and 44 to be heard at the same time or immediately after the other, further contradicts its assertion of a desire to expedite the trial of 44 without it being delayed by the alleged complexities in 3446.

60.Octo’s claims for its professional fees on quantum meruit basis are disputed by NTT, but on the evidence available, it cannot be plainly seen that Octo has no arguable cause of action.  Since Octo chose not to file a counterclaim in 3446, but to institute 44 separately, and as I have granted summary judgment on NTT’s claims in 3446, I will strike out Octo’s claims in 44 for the balance of the Licence Fee, but will not strike out its claims for professional fees on quantum meruit.  Judgment will be entered in NTT’s favor on its counterclaim in 44, with the order that the costs of the judgment on the counterclaim and striking out (of the claim for the Licence Fee) are to be paid by Octo on an indemnity basis, with certificate for counsel.

61.I further order that the costs of the action in 3446 and of NTT’s summons of 25 July 2017 in 3446 are to be paid by Octo to NTT, on the usual party and party basis, with certificate for counsel.

Mr Leo Remedios and Ms Astina Au, instructed by Robert Lee Law Offices, for the plaintiff (in HCA 3446/2016) & for the defendant (in HCA 44/2017)

Mr David Chen, instructed by Robertsons, for the 1^st defendant (in HCA 3446/2016) & for the plaintiff (in HCA 44/2017)