Read the full judgment text of HCA 004594/2003 on BabelCite. This High Court CFI judgment was delivered on 24 March 2004 before Deputy High Court Judge Muttrie.
Civil procedure – Order 14 – summary judgment – interlocutory injunction – Order 14A – Order 29 rule 11 interim payments – Rules of the High Court – contract for services – nightclub/karaoke operators – public relations managers – fixed-term contracts – non-competition clauses – key money – loans – potential illegality – prostitution – conspiracy – breach of contract – American Cyanamid test – Warren v Mendy – balance of convenience. The plaintiff is a partnership operating a karaoke nightclub; the defendants were engaged as public relations managers who recruited 'public relations hostesses' to entertain customers under fixed-term contracts containing non-competition clauses and an HK$300,000 liquidated damages provision, and were paid key money on signing. In November 2003, the 1st defendant was convicted in the District Court of three counts of exercising control over persons with a view to their prostitution and three counts of offering an advantage to a government servant (a senior superintendent of police, Sin Kam Wah), and was sentenced to three years' imprisonment. Following her conviction, the other defendants signed a joint declaration and from 10 December 2003 went to work for a rival establishment, New Star and River Night Club, taking about one-third of the plaintiff's hostesses with them. The plaintiff alleged breach of contract and conspiracy and issued an interlocutory injunction summons and an Order 14 summons seeking a final injunction, summary judgment for loans, an Order 14A determination that the fixed-term contracts were entire, and interim payments. Held (Muttrie DHCJ): First issue (Order 14 / Order 14A): unconditional leave to defend should be granted. The threshold for leave to defend is not high; defendants need only raise an issue that is not 'frivolous and practically moonshine' (per Godfrey JA in Man Earn Limited v. Wing Ting Fong, applying Codd v. Delap). Triable issues exist, namely whether defendants worked for the plaintiff or the 1st defendant personally, whether key money was paid to secure full performance or was a non-refundable signing-on fee, the authenticity of the contracts, and the fragmentary nature of the contracts which do not identify 'the company' although the plaintiff is a partnership. Further, the suspicion that the contracts may be illegal or contra bonos mores, given the District Court judge's findings that the primary function of the karaoke lounges including the plaintiff's was the provision of sexual services by hostesses, is itself 'some other reason for trial' (per Megarry J in Miles v. Bull; cf Bokhary JA in Re Safe Rich Industries Limited). Second issue (interlocutory injunction): refused. Applying the American Cyanamid test, although there is a serious question to be tried, the loss is pecuniary and could be compensated in damages. Movement of hostesses and mamasans between Federation member establishments is commonplace, and the plaintiff can readily recruit replacement staff, so there may be no continuing loss. The balance of convenience and risk of injustice favour the defendants, who are individuals that would be forced to seek menial work outside the nightclub trade. The court also considered (without deciding) the principle in Warren v. Mendy & Anor against indirect specific performance. Third issue (interim payments under Order 29 rule 11): refused. The court cannot be satisfied at this stage that the plaintiff will obtain substantial damages, and ordering a large organization to recover money from individual defendants at this stage would amount to harassment. Outcome: Order 14 summons – defendants granted unconditional leave to defend; costs (nisi) in the cause. Interlocutory injunction summons dismissed with costs (nisi) to the defendants (except 3rd, 9th, 17th, 20th and 21st defendants) in any event. Interim payments not granted.
Legal issues: Whether Order 14 summary judgment, final injunction and Order 14A determination should be granted · Whether interlocutory injunction restraining defendants from working for competitor should be granted · Whether interim payments should be ordered under Order 29 rule 11
Outcome: Order 14 summons: defendants granted unconditional leave to defend. Plaintiff's summons for interlocutory injunction dismissed. Interim payments refused.
Cited by 2 cases