Shaw Brothers (Hong Kong) Ltd v. Wang Yu
Read the full judgment text of CACV 54/1974 on BabelCite. This Court of Appeal judgment was delivered on 11 December 1974.
2. In so far as the present action claims an injunction for a period which comes within the period of the master contract there is clearly an estoppel per rem judicatem. Once it is recognised that Briggs, J. could have granted an injunction to cover the period of any extension of the master contract resulting from the exercise of a valid option it follows that the Plaintiff's remedy by way of injunction was exhausted in the first action. That alone is enough to dispose of the appeal, but the con
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CACV000054/1974 IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 54 OF 1974 (On appeal from O.J. 392/74) -----------------
----------------- Coram: Huggins & McMullin, JJ. Date of Judgment: 11th December 1974. ----------------- JUDGMENT ----------------- Huggins, J. : In the event this appeal turns upon a short point - whether the remedy sought in the present action was one which was available in the previous action tried by Briggs, J. (as he then was). It is contended on behalf of the Appellants that unless and until the option to extend the master contract had been duly exercised any injunction to restrain a breach of the contract had to be limited to the period of that contract, because the exercise of the option would bring into existence new rights and duties not existing under the master contract itself. Counsel sought support for his argument from William Robinson & Co., Ltd. v. Heuer 1898 2 Ch. 451 and he submitted that Branson, J. in Warner Brothers Pictures Incorporated v. Nelson 1937 1 K.B. 209 had misunderstood that decision. While that argument has a superficial attraction I do not think it is sound. The rights under the option are not so much entirely new rights as existing latent rights. Although, if the option be not exercised, an injunction to restrain a breach of contract of employment could not normally extend beyond the termination of the original term, it does not necessarily follow that an injunction cannot be granted for the term under the option also, conditional upon the option's being exercised. I think Branson, J. was right so to interpret the judgment in William Robinson & Co., Ltd. v. Heuer. When in that case counsel waived the right of the employer to exercise the option it was not, as Mr. Ching suggested, a bargain between counsel and the court without which the court would not have granted an injunction even up to the end of the original term of the contract: the court was concerned because it appreciated that if the option were going to be exercised the injunction could properly be extended to cover the whole or part of the period under the option. In the ordinary case an employer will not get the "reasonable protection" referred to by Branson, J. in Warner Brothers Pictures Incorporated v. Nelson unless the injunction is for the whole of the contract period, but where an employer exercises an option with knowledge that the employee has broken the contract and intends to continue so doing it may be that reasonable protection can be given without granting an injunction for the whole period of the extension. In the later case Branson, J. granted the injunction "during the continuance of the contract or for three years from now, whichever period is the shorter". By "the contract" he clearly intended not merely the original term but any further terms which would spring up by reason of the exercise of the option clause. In that case the initial contract was for only 52 weeks, with options to extend for further periods of 52 weeks. On the general principle of reasonable protection the injunction could not extend beyond the term of the contract, while, on the other hand, however many times the option was renewed an injunction limited to three years would give reasonable protection. 2. In so far as the present action claims an injunction for a period which comes within the period of the master contract there is clearly an estoppel per rem judicatem. Once it is recognised that Briggs, J. could have granted an injunction to cover the period of any extension of the master contract resulting from the exercise of a valid option it follows that the Plaintiff's remedy by way of injunction was exhausted in the first action. That alone is enough to dispose of the appeal, but the concession made by counsel who appeared for the Appellants before Briggs, J. strengthens the position of the Respondent. The concession was that the option clause was meaningless and was not relied upon. It was implicit in that concession that no right of option had ever existed and, while that was contrary to the Appellants' pleading, it was an inevitable consequence that no injunction could be granted beyond the term of the master contract. The judgment of Cons, J. rested upon other grounds, but it seems to me that it is not open to the Appellants to base their claim in this Court upon a stratum of fact which was inconsistent with the judgment in the previous action. 3. I would dismiss the appeal with costs. 11th December 1974. Representation: IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 54 OF 1974 (ON APPEAL FROM O.J. 392/74) -----------------
----------------- Coram: Full Court (Huggins & McMullin, JJ.) Date of Judgment: 11 December 1974 ----------------- JUDGMENT ----------------- McMullin, J. : This is an appeal from the decision of Mr. Justice Cons given in Chambers on the 2nd of December 1974 dismissing the application of the appellant company which had sought orders enjoining the respondent from engaging in a variety of activities allegedly in breach of contractual relations existing between them. The appellants are suing the defendant in Original Jurisdiction Action No. 392 of 1974 for damages for breach of contract and for a series of injunctions. On the proceedings before Mr. Justice Cons, they were seeking interlocutory relief in terms of the prayer in their statement of claim insofar as the latter related to relief by way of prohibitory injunction. 2. The respondent was employed as a film actor by the appellant company under a series of contracts commencing in August 1964. He was then unknown as a film personality and his remuneration was at a very modest level. His own acting abilities coupled with the promotional skills of his employers had resulted in his becoming an actor of star quality with considerable box office appeal. The first contract which was to have expired on the 25th of June 1966 did not run to term but was superseded by a second contract commencing on the 1st of April 1966 which was to run for three years until the 31st March 1971. This in turn was replaced by a third contract on the 1st of February 1968 which was for a fixed period of five years to end on the 31st of January 1973. This latter contract has been referred to throughout the proceedings as the master contract. In addition to the various positive rights and obligations undertaken by the parties it also contained certain negative covenants restraining the respondent from doing the work of a film actor and from engaging in action specified acts incidental to that work for any other person without the permission of the appellant company. 3. This series of contracts reflected the growing stature of the respondent and the master contract contained in its financial provisions terms which were very substantially more favourable to the respondent than had been the provisions of the earlier contracts. There was a further supplemental agreement dated 8th of February 1968 whereby it was agreed between the parties that the respondent should receive for every film which he made an additional sum of $15,000 per film a figure which represented a one hundred per cent increase in the figure agreed to be paid per completed film under the master contract in addition to the other salary arrangements made therein. Notwithstanding the improvement in his fortunes however it is clear that the respondent was dissatisfied with his terms of service and on or about the 10th of March 1970 he announced at a press conference that he had severed all connection with the appellant company and did not intend to continue any longer in their service. Shortly after that he left the Colony and engaged in film work elsewhere. 4. The appellant company took proceedings against the respondent for breach of contract claiming damages and certain prohibitory orders. The statement of claim, dated 12th of August 1970, was filed in O.J. Action No. 1274 of that year. The action was tried in the Supreme Court in May 1971 and the appellant company recovered judgment against the respondent on the 2nd of June 1971. There was then still about 18 months of the master contract period to run. The learned trial judge took the view that the evidence before him was insufficient to support more than a nominal award of damages and 50 was adjudged due to the appellant company in respect of that part of the claim. He also granted injunctions in the terms of the prayer confined to the period of the contract and also confined to the jurisdiction of the Supreme Court of Hong Kong. The injunctions thus claimed and granted were in the following terms:
Although the respondent paid the damages awarded against him he made it clear from the conclusion of the case that he did not intend to return to the employment of the appellant company and in fact he continued to work upon his own or for other companies outside Hong Kong. From time to time he would re-visit the Colony. 5. On the 17th of January 1973 the solicitors or the appellant company wrote on behalf of their clients to the respondent's solicitors informing him that they proposed to exercise a right of renewal conferred upon them by Clause 16 of the master contract. By letter of the 1st of May the respondent's solicitors informed the appellant company that their client was not admitting the validity of the clause upon which the appellant company relied on the grounds (a) that it was not a renewal clause at all; (b) that it was unenforceable for want of certainty; and (c) that it was in any event oppressive and unreasonable. 6. Clause 16 of the master contract is in the following terms:
Thereafter it appears that the respondent continued to work outside Hong Kong and he made no attempt to return to the service of the appellant company. 7. A further action was commenced by the appellant company by writ dated 8th of February 1974 issued in O.J. Action 392 of 1974. In this action the appellant company claimed damages for loss of profits arising from the respondent's breach of his contractual obligations between the date of the issue of the writ in the first action (the 12th of August 1970) or alternatively from the 19th of May 1971 (the last day of the trial before Mr. Justice Briggs) up to the end of the master contract period, the 31st of January 1973. This period was referred to in the writ as the "first absent period" the master contract being there referred to as the "first contract". The company also claimed that the respondent had been in breach of the prohibitory orders between the date of the judgment and the end of the master contract period. No particulars were given in the statement of claim but the affidavit of Miss Finny Chan sworn in the application for interim injunctions in the second action mentions press conferences and other interviews by the respondent during that time. The appellants also claimed damages for loss of profits arising from breach of what they called the "second contract" covering the "second absent period" that is to say the period between the date in January 1973 when they purported to exercise the right of renewal under the master contract and the 31st of January 1976 which was the end date of the renewal period. They also claimed repayment of $96,250, together with interest thereon, a sum which was said to have been over-paid to the respondent and which had also been claimed in the first action. There was further a claim for an injunction in terms very similar to those of the injunction claimed in the first action, those orders being sought in restraint of the respondent's activities generally and without limitation in time. 8. The respondent, by his defence, averred, amongst other matters, that the master contract was oppressive and unreasonably restrictive so as to be contrary to public policy and void; that Clause 16 of that contract did not confer a valid right to renew and was void for uncertainty; finally, and most importantly, from the point of view of the present appeal, that the claims both for damages and for injunctions were barred by reason of the former action as being res judicata or alternatively barred by estoppel upon the record. The respondent claimed declarations to that effect. He also denied that he had been in breach of any of the prohibitory orders. 9. On the 20th of November 1974 by inter partes summons the appellants applied to Cons J. for interlocutory injunctions in the terms of their writ. There is no doubt that from their point of view a measure of urgency had been injected into the situation by virtue of the fact that the respondent had returned to Hong Kong and, whereas on former visits he had, according to the appellants, done nothing more than give interviews concerning his career in breach of his obligation under what they deemsed to be his contract with them, he was, it was said, now actually in the process of filming in Hong Kong. They were satisfied that he proposed to continue doing so unless further restrained. 10. Before Cons J. it would appear that it was argued on behalf of that appellant company that Clause 16 of the master contract was a valid renewal clause giving the appellants the right to renew, upon the same terms, for a further period of three years and that the respondent was now clearly in breach of those terms. For the respondent it was argued that all matters arising from allegations of breach of the contractual terms of the master contract had already been litigated in the prior action or, alternatively, ought to have been so litigated and that the relief already given by the trial judge to the appellant company as to be regarded as having exhausted their remedies against the respondent. The learned judge in Chambers refused the application and gave an oral judgment embodying his reasons for so doing. Included in the record before us, however, there is a note of the argument upon which this extempore judgment was delivered and it would appear from this that the principal reasons given for refusing the application were, firstly, that the balance of convenience was against the making of the orders prayed for and, secondly, that there was substance in the respondent's contention that the fresh claims under the new action had been barred by the adjudication in the former action. In this matter the learned judge appears to have taken his stand upon the proposition that, whether or not the appellant company had actually argued the matter before the learned trial judge, the whole question of the rights of renewal, if any, secured by Clause 16 and the alleged damages arising from breach of those rights, subsequent to the purported renewal, were all matters which could have been and ought to have been litigated at one time upon the trial of the prior action. 11. Upon the re-hearing of the application before this court upon the appeal it appeared at the outset likely that the full range of topics covered before the judge in Chambers would be ventilated afresh including the question of the alleged oppressiveness of the contract and the balance of convenience between the parties in relation to the grant or withholding of the prohibitory orders. On the second day of the hearing however counsel brought to our attention a matter which was clearly not before the judge in Chambers. Mr. Swaine, who has appeared throughout for the respondent, informed us that a further consultation with the note which he had taken of the proceedings at the trial of the action disclosed something which he had overlooked at the outset of the appeal and which was in his view a matter of considerable importance. According to this note Mr. Zimmern, who was then counsel for the appellant company, had, in the course of a submission to the trial judge, made a concession which, in counsel's submission, must necessarily have had a very important effect upon the decision at the trial and must a fortiori go to the root of the matter then at issue before the court upon appeal. What it amounted to was that Mr. Zimmern appears to have conceded that Clause 16 of the master contract was as he put it "meaningless" and he was recorded as saying further that the plaintiffs (the present appellants) did not seek to rely upon it for the purposes of that action. Mr. Ching who had not appeared on the trial of the action and who now stood before us in the shoes of Mr. Zimmern frankly and fairly admitted the importance of this matter and was afforded the opportunity of consulting with Mr. Zimmern as to his memory of the submission It need only be said that both Mr. Ching and Mr. Zimmern with characteristic fairness were prepared to concede that the note taken by Mr. Swaine accurately reflected what had been submitted at the time. Mr. Ching (and it would appear Mr. Zimmern also, although of course we did not hear from him in person) took the view that such a concession should not have been made but that even if made it was not a matter upon which the judgment of the court could have turned and therefore should not be regorded as concluding the case against the appellants by anything in the nature of an estoppel. 12. Mr. Swaine relied heavily upon the decision of Branson J. in Warner Brothers Pictures Inc. v. Nelson(1) a decision upon which reliance had been placed by Briggs, J. at the hearing of the first action and by Cons J. at the hearing of the interlocutory application in the second action. Before turning to consider that case it will be helpful to explore the manner in which the concession made by Mr. Zimmern at the trial might be said to affect the whole question of estoppel per rem judicatam in the circumstances of the present case. If counsel were held to have admitted before the trial judge that the clause was altogether ineffectual then, of course, the judgment delivered in the case must necessarily be held to preclude, in limine, any further action be the appellant company founded on the terms of the mater contract since Clause 16 of that contract provided the only gateway to lead them from the termination of all contractual rights under it to any further rights arising from it. But even if the concession were read in a weaker sense to mean only that the court of trial was not then concerned with that clause and that the plaintiffs did not propose to rely upon it for the purposes of that action, so that it was, in a sense, meaningless within the framework of the plaintiffs' claim at the time, then, even in those circumstances, the appellant company would find itself confronted with the principle established as long ago as 1843 with Henderson v. Henderson(2) and which is well expressed in the words of Sir James Wigram, V-C at pages 114-115:
In other words provided it could be shown that Clause 16 its meaning and effect and the purported extensions of the contractual rights under it were properly subject matter of the litigation then before Briggs, J. the appellant company would fall foul of the rule which requires all litigants to bring forward their whole case at one time where it is possible to do so and not to resort to piecemeal litigation over a matter which might fairly be regarded as a single cause of action. 13. Mr. Ching argued that, whatever may have been intended by counsel at the time, Clause 16 could not have attracted any adjudication by the court for the simple reason that it was no part of the litigation then in progress. This was so, he said, because the option provided by it had not yet been exercised and did not fall to be exercised for some 18 months after the conclusion of the trial. In his view the question of the right interpretation of that clause was not before the court in fact and even if it had been put in issue by counsel, or seised upon by the trial judge, there could not have been a competent adjudication upon it because the right of action provided by it had not yet been perfected and could not therefore have been made the subject of litigation. It may be said at once that there is some indication in the judgment of Briggs, J. that the matter was indeed agitated before him and that he purported to decide it since, having referred to the decision in Warner Brothers v. Nelson(1) he went on to grant the injunction which was asked for but to add that it would be confined to the period of the contract. The conjunction of the reference to that decision with the subsequent order made by the trial judge is significant since the facts in that case present striking similarities to the facts in the present case. It would seem likely that in considering the earlier case Briggs, J. did advert to the possibility of granting an order for a period longer than the existing contractual term. 14. In that case as in this a prominent film personality had undertaken during a term of employment not to render any services for or in any other photographic stage of motion picture or business of any other person without the written consent of the plaintiff company. Before the expiration of her contract a further contract was entered into and it was that subsequent contract which was the subject matter of the litigation before the court. Under that contract she was to receive a greatly enhanced salary upon conditions which were otherwise substantially the same as previously. The contract was to run for 52 weeks at their option. As in the present case an initial contract (in the year 1931) had been superseded by subsequent contracts on more favourable terms and when the case was before the court the rights and obligations of the parties were being examined within the framework of one of the periodic extensions of 52 weeks which had been entered upon at the option of the film company. At that date, the company's right to extend further by virtue of the option clause would if fully exercised have taken the whole contract period up to May 1942. The date of the trial was October the 24th 1936. In that case as in the present case when it was at hearing before the judge in Chambers it was argued on behalf of the defendant that the contract was unnecessarily restrictive and was therefore in restraint of trade; it was also said that to bind the defendant to the full vigour of the negative covenants by way of injunction restraining her from acting for other persons or companies would in effect be to give specific performance of the positive covenants. With these matters we are no longer concerned in the present case. The point which is of crucial importance here, and which appears to be established by the judgment in Warner Brothers v. Nelson(1) is that the court in that case granted injunctions restraining the defendant for a period of three years from the date of judgment or for the continuance of the contract whichever period should be the shorter. In other words, the prohibitory order was to bind the defendant for a period longer than that of the existing contractual period of 52 weeks without regard to whether or not the employers' option to renew for a further period of 52 weeks would be exercised. Mr. Swaine argues that that order could never have been made if Mr. Ching's contention is right since, if it is right, the court would necessarily have restricted its order to the limits of the existing contractual period and would have refrained from extending the injunction further on the basis that the right to sue under the further extended period had not yet arisen. Clearly the court took the view that the remedy to be given was one which should be given once and for all within the total framework of the existing contract together with all possible extensions. Branson J. relied upon the judgment of the Court of Appeal in Robinson (William) & Co. Ltd. v. Heuer(3). In that case a confidential clerk was engaged for five years from the first of January, 1895, by the plaintiff company. There was an option which permitted the company to renew the engagement for a further five years. He undertook that during the period of his engagement with the plaintiff company he would not engage in any business relating to goods sold by the company or in any other business whatever upon pain of instant dismissal. In 1898, while there were still about two years of the first contract period of five years to run, the defendant left the service of the plaintiff company and became a traveller with another firm carrying on the same business. The plaintiff company applied for an injunction to restrain him during the term of service from carrying on as principal, agent, servant, or otherwise, any business relating to goods of the description. made by the company, and from sloiciting orders for other firms. In the course of the argument counsel for the defendant undertook to waive the option of continuing the defendant's employment for a second term of five years. Both Lindley M.R. and Chitty L.J. expressed concern that the court might do injustice if it granted an injunction restraining the defendant's activities to the full extent of the language employed in the contract and to do so, moreover, for the extant contract period together with the period of the optional extension. Two matters were therefore at issue: firstly, whether to give an injunction in the widest terms might be to sin against the principle that the court will not enforce negative stipulations if to do so is in effect to enforce a positive stipulation in a contract for personal services thus forcing the servant to continue in the employment of the master; secondly, whether it was just that any order made should extend for the whole 10 year period. The first misgiving was removed by virtue of the fact that the plaintiffs only claimed an injunction restraining the defendant from engaging directly or indirectly in any trade or business etc. of the description carried on by the plaintiffs. The second misgiving was removed by the undertaking of counsel on behalf of his client not to exercise the right given under the option clause. In relation to the narrower type of order which was being sought Lindley M.R. had this to say:
An injunction was therefore granted in the narrower terms to cover the remaining period of the original engagement. From the language engagement. it is clear that the court also considered that it might be possible to grant an order restraining the defendant for a possible extending into a possible extension of the original term by virtue of the exercise of the option. 15. Mr. Ching acknowledges the force of these decisions but he points out firstly that we are not bound by them and secondly he says that in any event we do not know sufficient about the nature of the pleadings involved int cases or of the arrangements made between counsel at the hearings to be quite sure that the option clauses there involved were in exactly the same kind of terms as we are here concerned with. It might be, he says, that these were options which could have been exercised at any point during the extant contract period so that the interpretation of them rightly fell within the purview of the courts of trial. That is an adroit attempt at a valid distinction but to my mind it will not do. In Warner Brothers Pictures Inc. v. Nelson(1) Mr. Justice Branson said at page 168:
To my mind that is a succinct statement of the correct principle and it means that in circumstances such as the present where a contract of services is involved the court has a right and a duty to see that all available remedy is sought and granted at one time. There is moreover to my mind considerable substance in the observation of Cons, J. at the hearing in Chambers when he pointed out that the contractual rights he was then considering were the result of a mere extension by unilateral act of the appellant company of the master agreement. No doubt it is strictly accurate to say that the contractual rights in existence before Cons, J. were not those in existence before Briggs, J. at the trial of the first action, but they were latent in the master contract as it then existed and must therefore be considered in a wholly different light from such contractual rights and obligations as might have sprung up afresh at the conclusion of the period of the master contract by the coming together of the parties for the purpose of forming a fresh contract even upon the same terms. The conclusion must be therefore, whatever view one takes of counsel's concession at the court of trial, that it was open to the court to adjudicate upon the whole substance of the contract including all possible extension periods in forming its opinion as to what was the appropriate length of time for which the prohibitory orders should be imposed. This is so either because counsel was conceding that the clause was wholly meaningless and this being adjudicated by the court by implication no further course of action could arise by virtue of it or else because counsel specifically asked the court to grant relief only within the framework of the extant contract term when, upon the authority of the two cases already cited, he ought to have ventilated the entire grievance of his client and asked for all relief available to his client as a result of the steadfast and continued rejection by the respondent of his contractual obligations. Since we cannot be absolutely sure of the line of argument taken at the trial of the first action or of the extent to which the judgment followed that argument it is not possible to say precisely whether the principle of res judicata applies in the stronger or in the weaker sense. As Mr. Swaine puts it, however, the undertaking given by counsel in Robinson v. Heuer(3) stands on a very similar footing to the concession made by Mr. Zimmern in the present case and even if the principle be applied in the weaker sense it must be said that the issue of the respondent's breach of contract and its consequences is now concluded. 16. In the course of the hearing we indicated that since the point of estoppel would be decisive if it were to go in the respondent's favour we wished counsel to concentrate their argument upon that point alone. In the result it became unnecessary to consider the wider issues raised upon the appeal and cross-appeal as set forth in the respective memoranda of the parties. For the reasons given above we dismissed the appeal. Representation: (1) (1936) 3 All E.R. 160. (2) (1843) 3 Hare 100. (3) (1898) 2 Ch. 451. |