Intell Education Ltd. v. Siu Yat Ming and Another

HCA 169/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 169 OF 2002

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Coram: Deputy High Court Judge Gill in Chambers

Date of Hearing: 18 January 2002

Date of Judgment: 24 January 2002

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J U D G M E N T

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1.This is an application for an interlocutory injunction. Two affidavits were filed; one in support the other in opposition. That in support was made by Yiu Wai Yu, Catherine (Miss Yiu), a director of the plaintiff. That in opposition was made by the 1st defendant. There are many facts in dispute, but in summarising the background I recount those that are not.

Background

2.The plaintiff is a tutorial school of some size and prominence. As such it runs tutorials for high school students looking to enhance their performance in the subject in which they enrol. There is a related company, called Express Education Limited (Express Education). Together they operate from eight centres based in Kowloon, Kowloon Bay, Yau Ma Tei, Causeway Bay, Wanchai, Tsuen Wan, Shatin and Tuen Mun. Audited accounts for the year ending June 2000 revealed a turnover of $147 million and shared profits of $21 million. More up-to-date figures were not produced.

3.Presently on the plaintiff's staff there are some 30 teachers and 150 support staff. Until recently the 1st defendant was employed as a teacher of mathematics. He has no university qualification which thus limits his eligibility to tutor up to the level of Form 3. The plaintiff was authorised by permit from the Director of Education to employ him within that limitation.

4.The 1st defendant's relationship with the plaintiff began with its predecessor, called Intel Maths Workshop Division, in June 1995, when he contracted to provide tutorial services in maths; this was for levels Forms 1 to 5 notwithstanding the aforesaid limitation. This contract ran its term but came to be successively renewed to May 2001.

5.Remuneration for the tutors is founded on a percentage of the tuition fees paid by the students in the classes run by them. The more popular the tutor the more students he attracts which is reflected in the income he earns. The 1st defendant's performance revealed a steadily growing popularity. For the year ending June 1997 he earned $861,584.00. For just 11 months to May 2001 this had become $2,444,845.00.

6.These proceedings derive from a contract entered into between the plaintiff and 1st defendant in June 2001. Under its terms he was, as before, to provide tutorials for students from levels Forms 1 to 5 in maths; as before the remuneration was calculated in percentage terms. It was scheduled to run from 16 July 2001 to 15 July 2006 which later date was referred to therein as the Expiry Date. Under clause 4.1 either party was given the right to terminate earlier, upon giving notice of not less than 1 year.

7.Clauses 7.1, 8.1 and 8.2 are pertinent and I repeat them verbatim. The plaintiff is referred to as the Company and the 1st defendant as the Tutor:-

"7. PROHIBITIONS AND INDEMNITIES:-

7.1 The Tutor shall not do anything or supply any article in breach of any intellectual property of the company, any person or any entity and shall compensate or indemnify the Company against the consequence in this regard including the payment of any royalties or other charges falling to be paid by the Company which but for such neglect or default would not have been so payable."

8. NON-SOLICITATION & NON-COMPETITION:-

8.1 The Tutor expressly covenants with the Company that he shall not during his employment under this Contract and until the expiration of 12 calendar months from the Expiry Date commit all or any of the following acts in Hong Kong:-

i) be in connection with the carrying on of any business or activity similar to or in competition with the business of the Company of providing tutorial services to students whether on his own behalf or on behalf of any person, firm or company directly or indirectly;

ii) canvass solicit or entice away from or endeavor to canvass solicit or entice away from the Company any students of the Company who have enrolled with the Company during his employment or intend to enrol with the Company;

iii) either alone or jointly with or as manager, agent, consultant or employee of any person, firm or company directly or indirectly carry on or be engaged in any business or activity similar to or in competition with the business of the Company of providing tutorial services to students;

iv) teach, whether on a part-time or full-time basis, whether for any remuneration or not, in any other school(s), institution(s), or education establishment(s) save and except with the prior written approval of the Company.

8.2 Notwithstanding the termination of this Contract (howsoever arising), Clause 8.1 above shall survive this Contract and be binding on the Tutor as though this Contract had not been terminated until the expiration of 12 calendar months from the Expiry Date."

8.On 11 December 2001 the 1st defendant handed to Miss Yiu a letter of resignation, purporting to terminate the contract with immediate effect. Although on the face of it this contravened the obligation to give 1 year's notice, it was accompanied by a letter from solicitors the 1st defendant had instructed in which they wrote that the plaintiff was in material breach of the contract, giving their client the right to end it forthwith. The stated grounds were that the plaintiff repeatedly was late in payment of his wages. The letter went on to state that the contract between the parties was illegal, without specifying the illegality or the effect of that. The plaintiff wrote declining to accept the resignation, citing clause 4.1.

9.But the 1st defendant did not thereafter return to work. Now he has come to be employed by the 2nd defendant, a recently incorporated company which promotes itself as offering tutorial services to students. The 1st defendant has been hired to tutor students at mathematics.

10.The plaintiff does not accept that the 1st defendant was entitled to terminate its contract without notice in terms of clause 4.1 and, by contracting with the 2nd defendant, he is thereby in breach of clause 8.1. Even if the contract was lawfully terminated he is nevertheless still in breach of his contractual and fiduciary duty not to compete. Furthermore, there has been a steady spate of resignation of students hitherto tutored by the 1st defendant since his departure, with a consequent reduction in fees received. Correspondence calling upon a cessation of this activity had no effect.

11.Its directors then received word that the 1st defendant's classes were due to begin with the 2nd defendant on 14 January 2002. On 15 January it filed its writ.

The Proceedings

12.Alleging breach of his fiduciary and contractual obligations spelt out in clause 8.1, the plaintiff seeks an injunction that he be prevented from engaging in activity set out therein save that there is no time limit. It also seeks an injunction against the 2nd defendant that it not induce or procure the 1st defendant's breach. There are further claims for damages and or in the alternative an accounting for profits.

13.At the same time the plaintiff filed an application inter partes for injunctions against both defendants pending trial. This is the matter that came before me for hearing on 18 January, only three days after filing and service.

14.Notwithstanding the limited time the 1st defendant filed his affidavit in opposition just before the hearing. Sir John Swaine SC leading Mr Au for the plaintiff sought an adjournment for time to reply. Mr Ng for the defendants opposed. For reasons given and recorded elsewhere I declined the application and the matter proceeded.

15.It is convenient to record, verbatim, what the plaintiff presently seeks, as follows:-

(1) Until after the trial of the action herein, the 1st Defendant be restrained from:-

(a) carrying on any business or activity similar to or in competition with the business of the Plaintiff of providing tutorial services to secondary school students whether on his own behalf or on behalf of any person, firm or company directly or indirectly;

(b) canvassing soliciting or enticing away from or endeavouring to canvass solicit or entice away from the Plaintiff any students of the Plaintiff who have enrolled with the Plaintiff during his employment or intend to enrol with the Plaintiff;

(c) either alone or jointly with or as manager, agent, consultant or employee of any person, firm or company directly or indirectly carrying on or being engaged in any business or activity similar to or in competition with the business of the Plaintiff of providing tutorial services to secondary school students;

(d) teaching, whether on a part-time or full-time basis, whether for any remuneration or not, in any other schools, institutions or education establishments save and except with the prior written consent of the Plaintiff.

(2) Until after the trial of the action herein, the 2nd Defendant, either by itself or through its agents, servants or employees, be restrained from inducing procuring or facilitating and/or continuing to induce procure or facilitate the 1st Defendant's breach of any of his duties hereinabove set out.

(3) Costs be provided for.

16.At the outset Sir John told me that the plaintiff was prepared to undertake in terms of 1(d) that it would consent to the 1st defendant's employment in any Government funded or aided school in Hong Kong. He also said it was prepared to give the usual undertaking in damages fortified up to $5 million.

17.I now turn to record and consider the evidence filed in support and opposition.

The Evidence

18.Miss Yiu said the plaintiff in partnership with Express Education is a leader in the field of providing tuition services and attracts students from all over Hong Kong. The 1st defendant falls into the category of particularly popular or 'star' tutors, so-called because of the large number of students who enrolled in his classes. That popularity is graphically revealed in the level of income he enjoyed and contributed to the financial wellbeing of the plaintiff.

19.I repeat verbatim clause 14 of the affidavit:-

"14. The 1st Defendant is one of the Plaintiff's "star" tutors. Although the Plaintiff has 5 teachers or tutors offering mathematics tutorial courses to high school students, the 1st Defendant singly commands approximately 60% of the Plaintiff's F.3 to F.5 students enrolled for mathematics courses. The 1st Defendant's relationship with the Plaintiff started some 6 years ago."

and clause 12:-

"12. This high quality of the Plaintiff's teaching staff is obviously one of the main factors which attracts students to come to attend the Plaintiff's tutorial courses. However, by the same token, the students, who are the main source of the Plaintiff's revenues, are also easily influenced by the individual teaching staff or tutors. These students are likely to follow the individual teacher or tutor who provides the tutorials if this particular teacher or tutor is to leave the Plaintiff for another tutorial class provider."

20.Prior to his departure there were a total of 1,696 students enrolled in classes tutored by the 1st defendant. Since his departure was announced some 716 have cancelled, left the course and applied for a refund. She had cause to believe that they or at least the significant majority had left to follow the 1st defendant, and to this end exhibited an ICQ communication he posted on the internet, which I repeat:-

"Hi

Everyone, I have already left Intell, and I will be teaching at another place. But each class has only 28 people.

Because of the limited amount of people per class, we will register on a first come first serve basis. For further details, please call my pager.

F5 $400 - 1.5 hours

F4 $350 - 1.15 hours

F3 $250 - 1 hour

Thank you for your support; you will always be my friends forever."

21.The loss of the 1st defendant to the plaintiff will have a significant impact on its finances; that is why his contract, as with any of the star tutors, includes the non-competition clause. In his case the plaintiff grossed some $7.1 million for the year to June 2001. Less his commission this amounts to a gross profit of about $4.6 million, all or most of which it will stand to lose.

22.She said there was further cause to believe that the 2nd defendant, purportedly the 1st defendant's employer, was in fact set up by him and that he has a proprietorial interest in it. This derives from the following:-

(a) the 1st defendant and a man called Chiu Sien Hong (Chiu) together as founding shareholders incorporated a company called Ultra Idea Limited in March 2001. Cheung Pui Chiu Maggie (Miss Cheung) was or became appointed as a director. She is the 1st defendant's girl friend;

(b) the 2nd defendant came to be incorporated in June 2001. Chiu and Miss Cheung were the founding shareholders;

(c) one of the former students of the plaintiff who came to enrol with the 2nd defendant wrote to explain how this came about. I repeat verbatim a translation of his letter:-

"· I, Hui Wai Ho, ID Card Number XXXXXXX(X), is a Form 4 student, have attended tuition courses at Intell Education since September 2001, live in Shatin area.

· As I know Thomas is admitting Intell's students at another tutorial centre, so, I followed the instruction of an icq forwarded to me at early January by Thomas, and according to information provided to me by the response person with pager number 77287074, brought together the Intell's receipt of tuition fee of Thomas's class, went to register at the Ultra Idea Education Centre at Parker's Street, Jordon.

· On January 7th 2002, at about 4pm, I went to the tutorial centre named Ultra Idea Education Centre, I saw Thomas Siu sitting at the reception, doing registrations and collecting tuition fees from students.

· After I have showed the Intell's receipt of tuition fee of Thomas's class as proof, I then registered in one Form 4's Mathematics course.

· Such Form 4's course was named "Junior Secondary Comfortable Mathematics Course", to my understanding, it will be taught by Thomas Siu personally. The course starts on 14th January 2002.

Signed__________

Date 14/1/02"

23.She did not know what to make of the 1st defendant's solicitors' reference to the contract being illegal in their letter which accompanied the 1st defendant's resignation. On this point I repeat verbatim paragraph 66 of her affidavit:-

"66. However, what I can say is that, as far as the Plaintiff is concerned, since the 1st Defendant does not hold a university degree and is studying for a higher certificate in education at Hong Kong Computer Institute, in order to ensure the quality of his tutoring, since July 2001 the Plaintiff had arranged and ensured that there was a teacher who held a university degree to be present with the 1st Defendant whenever he was conducting tutorial courses for F.4 and F.5 students."

24.I come now to the 1st defendant's affidavit.

25.He confirmed that he is not a university graduate and as such can only teach to level Form 3. But throughout his time with the plaintiff or its predecessor he was contracted to tutor to level Form 5. Of course that included the contract giving rise to this litigation. In fact the majority of his classes were for Forms 4 and 5. Aware that he has all along been teaching illegally, he wanted to put his house in order and enrolled for the necessary qualification which he hopes to achieve this Summer. He approached the plaintiff seeking leave of absence for the purpose. That fell on deaf ears, and gave rise to his resignation. But there was another reason, and I repeat verbatim those clauses of his affidavit which relate to that:-

"Over-sized classes

16. There is another reason for my departure. It is true that the Plaintiff is a very popular tutorial school among the secondary school students in Hong Kong. In order to make their business more profitable, it used to be a policy of the Plaintiff to run large classes of up to about 200-300 students. There used to be large lecture halls in the various centres of the Plaintiff to accommodate such large classes. However, since about a few years ago, the Education Department have begun a campaign to clamp down such malpractice and would send out inspectors to conduct site inspections to ensure that all the classes are within the legally permitted size, which is 45 students for each class, as I understand it.

17. To circumvent such legal restriction, the Plaintiff has built specially designed classrooms to hold large classes in what I believe an illegal way. To illustrate, I have drawn a floor plan of classroom no. 839 of the Shatin Centre in which I used to teach Mathematics for the Form 4 and Form 5 students. There is now produced and shown to me marked "SYM-4" a true copy of the said floor plan. The premises are divided into 4 classrooms, namely, classroom A, B, C and D. There is posted on the entrance of each classroom an official notice issued by the Education Department certifying the maximum number of students that each classroom can hold. I remember that the maximum number of students each classroom could hold was no more than 30 at this Shatin Centre. Between the classrooms is a huge glass wall. I would be located in one of the classrooms (say classroom A) to conduct the lecture. There is a overhanging projector and a huge screen in classroom A and B. There is also a television in each of the classrooms. Under this arrangement, I can conduct a lecture for 100-150 students at the same time. Although the students are distributed in 4 different classrooms, they can listen to my lecture simultaneously; they can see me through the glass wall; they can also see my writing on the blackboard via simultaneous television transmission.

18. Each classroom is also attended by a teacher assistant known as TA in this industry. As I understand it, most of the TAs are university degree holders but they are not involved in teaching in any manner. The only purpose of their presence is to fulfill the relevant requirement that each class of 45 students is attended by at least one teacher. Because of this specially designed classroom, I was able to continue to conduct lecture for large classes.

19. There are times when the Education Department would send an inspector to conduct site inspections at the various tutorial centres. That is to ensure that the relevant regulations are complied with by the tutorial schools. I encountered one such inspection when I was conducting lecture in a similarly designed classroom in the Kowloon Bay Centre in August 2001 and one in Wanchai Centre in December 2001. On both occasions, I was informed by a staff-member of the Plaintiff that an inspector from the Education Department was conducting an inspection. In accordance with the standard practice of the Plaintiff, I would stop the lecture immediately. Curtains were pulled down to hide the glass walls such that each classroom would seem to stand on its own. The TAs would issue some test papers to the students for the students to do while the inspection was going on. They would not take over the lecture as they were not supposed to be involved in teaching at all. I would then walk out of the classrooms. What the inspector would see was 3 classes of students quietly doing their exercises in 3 individual classrooms. After the inspection, the curtain would be pulled up. The TA would go back to their seat and I will come back to resume the lecture, just as before.

20. There are now produced and shown to me marked "SYM-5(a)" a true copy of a statement made by one of my TA, Mr Chan Chiu, describing his role as a TA, and "SYM-5(b)" a true copy of a statement made by one of my former students describing the above mentioned inspection of the Wan Chai Centre.

21. I believe such practice is a contravention of the relevant law and regulation. Although I also benefited from this arrangement in that I would make more money, I did not wish to continue to teach in such setting. Should this practice be made known to the Education Department, I fear that as a teacher I would attract personal liability, not to mention the Plaintiff."

26.I also reproduce translations of exhibits 5(a) and (b):-

"Exhibit "SYM-5(a)"

I, Chan Chiu, was employed by Intell Education Limited to be a teacher assistant during the period of July. The main purpose was to be the teacher assistant for the classes conducted by Thomas Siu. I confirm that on each occasion there were 3 classes (each consisting 40-45 people) of students attending the Mathematics lecture run by Thomas Siu. Between the classrooms there was a glass wall. I sat in the classroom of Thomas Siu. Each of the other 2 classroom was attended by another teacher assistant. The purpose was that, whenever an officer from the Education Department came for an inspection, the teacher assistants would pretend to be the teachers conducting the classes. However, the other two teacher assistants and I were not expected to teach the contents of any subjects.

Chan Chiu

17th January 2002

Exhibit "SYM-5(b)"

I, Ko Hok Man, went to the Wan Chai Centre of Intell Education Limited to attend a class on 6th December. When I arrived at the 4th Floor, I saw Thomas Siu leaving the classroom. I later found that two female officers from the Education Department came to visit the centre. After a while, the counter staff arranged me to enter the classroom. I entered the 2nd classroom. At that time, the curtain was pulled down. As I understood, the class had been scheduled to cover the subject of co-ordinates, but the class was temporarily cancelled and a written test was arranged instead. At about 8:00 pm, Thomas Siu returned to the classroom, he said that the lecture was cancelled and would be postponed.

Student Signature

16th January 2002"

27.He said further that a continued cause for complaint was that the plaintiff was persistently late in payment of wages, sometimes by several months.

28.He then went on to deal with how the 2nd defendant came to be incorporated. He said Ultra Idea Limited was intended to operate a restaurant. But nothing came of the plan and it was deregistered. Chiu then decided to incorporate the 2nd defendant as a tuition school. His girl friend became a co-shareholder (50%) because she wants to be a teacher. He said: "Since I have left the employ of the plaintiff, it is natural for me to work for Ultra Idea Education Limited."

29.He also queried the potential loss in income the plaintiff claims it will suffer from his departure. He said it was common practice for so-called 'star' tutors to change jobs. He had no reason to believe his named replacement who, incidentally, is qualified to teach at level Form 5, would not more than adequately fill his shoes.

30.From the bar table Mr Ng said he was instructed by the 1st defendant to respond to the concession offered by the plaintiff that it would consent to his being employed by any Government or aided school; that was that, given that he is not a qualified teacher, his chances of being recruited are negligible.

31.Following that, on instruction, Sir John told me that the plaintiff no longer sought the injunction at 1(d).

32.That being a summary of the pertinent evidence, I now come to consider the summons before me.

33.First, however, the legal principles.

The Law

34.This being an application for an interlocutory injunction, the starting point is the hallmark House of Lords case of American Cyanamid Co. v. Ethicon Lmited [1975] AC 396.

35.Lord Diplock said at page 406:-

"The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The court must weigh one need against another and determine where "the balance of convenience" lies."

36.He went on to state that it is no function of the court at this stage of the litigation to try to resolve conflicts of evidence on affidavits as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.

37.He said that the court asked to grant the interlocutory injunction must no doubt be satisfied that the claim is not vexatious or frivolous; in other words that there is a serious question to be tried, before embarking on the 'balance of convenience' exercise.

38.He went on to state at p. 408:-

"So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought.

As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.

It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.

Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial."

39.With these legal principles in mind, I now turn to consider the application before me.

Is There a Serious Question?

40.Sir John argues, undoubtedly there is. There is a contract. The parties were and remain bound by its terms. The 1st defendant is caught contractually and at Common Law to obey the non-solicitation and non-competition clause. By joining the 2nd defendant and by soliciting former pupils of the plaintiff he is in breach. And the 2nd defendant with knowledge and intent is guilty of the tort of inducing and procuring the breach.

41.But there is the illegality issue to consider. A party to a contract that is illegal as formed or in the performance is barred from enforcing the terms of the same. The principle was applied in the English Court of Appeal case Ashmore Benson Pease & Co Limited v. A V Dawson Limited [1973] AC 828. In that case the plaintiffs employed the defendant carriers to carry a tube bank weighing 25 tons by road from Stockton-on-Tees to Hull. The defendants supplied an articulated lorry, which by reason of the Motor Vehicles (Construction and Use) Regulations 1966, regulation 73(2) was not entitled to carry more than 20 tons. The plaintiffs' transport manager must have known that the load was too heavy for the lorry. The lorry toppled over against the grass verge whilst being driven on its journey. The load was damaged. The plaintiffs claimed damages from the defendants. The defendants pleaded that they were under no liability because the contract of carriage or the performance of it was illegal.

42.The judge at first instance found the contract was lawful when made; as a consequence the defendants were liable. But on appeal it was held that as the plaintiffs knew that the load was overweight and in breach they had participated in the unlawful performance, and were debarred from claiming damages in negligence.

43.Lord Denning MR said at p. 832:-

"........., I am prepared to accept that Judge's finding that the contract was lawful when it was made. But then the question arises: Was it lawful in its performance? The Judge's attention does not seem to have been drawn to this point. Yet there are authorities which show that illegality in the performance of a contract may disable a person from suing on it, if he participated in the illegality. This was pointed out by Lord Justice Atkin in Anderson Ltd. v. Daniel, [1924] 1 K.B. 138, in a passage which was quoted by Mr Justice Devlin in St. John Shipping Corporation v. Joseph Rank Ltd., [1957] 1 Q.B. 267, at p. 282; [1956] 2 Lloyd's Rep., at p. 417:

.... The question of illegality in a contract generally arises in connexion with its formation, but it may also arise, as it does here, in connexion with its performance. In the former case, where the parties have agreed to do something which is prohibited by Act of Parliament, it is indisputable that the contract is unenforceable by the offending party where the illegality arises from the fact that the mode of performance adopted by the party performing it is in violation of some statute, even though the contract as agreed upon between the parties was capable of being performed in a perfectly legal manner. That passage was further approved by Lord Justice Jenkins in B. and B. Viennese Fashions v. Losane, [1952] 1 T.L.R. 750, where he said, at p. 755:

.... that illegality in the performance of a contract may avoid it, although the contract was not illegal ab initio ....."

44.Mr Ng before me argued that the contract in question was both illegal in formation and performance, being contrary to the provisions of the Education Ordinance, Cap. 279 (EO) and the Education Regulations (ER).

45.Section 42(2) of the EO states:-

"No permitted teacher shall teach in a school otherwise than in accordance with the conditions or limitations specified in the permit to teach issued in respect of such teacher."

46.Section 87(3) EO sets out the penalty for such contravention:-

"Any person who

...

(e) contravenes section 42(1) or (2);

(f) employs or permits any person to teach in a school in contravention of section 42(1) and (2); ...

...

shall be guilty of an offence and shall be liable on conviction to a fine at level 5 and to imprisonment for 2 years."

47.Regulation 88(c) of the ER governs the maximum size of the classes:-

"In any school providing primary, secondary or post-secondary education or any other educational course, not more than 45 pupils shall be taught at one time by one teacher, except in special cases with the permission of the Director."

48.Mr Ng pointed out that the contract required the 1st defendant to:- "diligently and faithfully provide the different tutorial courses in mathematics ......... in accordance with the manner provided in schedule 2 annexed hereto ..........". Schedule 2 provided for 34 different courses, of which 29 were at level Form 4 or above. So, performance of the contract gave rise to a criminal offence punishable by imprisonment under section 42(2) of the EO. Furthermore, the size of the 1st defendant's classes being habitually more than 45 there was contravention of regulation 88(c) ER.

49.Sir John countered that even on the 1st defendant's evidence, in which he described the manner in which the classrooms are subdivided with a properly qualified teacher present in each quadrant, it is at least arguable that such steps undertaken rendered the contract, in the formation and performance, lawful.

50.I do not agree. I accept that the plaintiff was denied the opportunity to respond to the issues raised in the 1st defendant's affidavit. But nothing can alter the fact that the contract as worded is quite patently at odds with section 42(2) of the EO. The 1st defendant was obligated to teach pupils up to level Form 5, contrary to the limits imposed in the Education Department's permit addressed to the plaintiff. And I have no hesitation in finding that the manner in which the classrooms were subdivided, curtained and manned, was a none-too-subtle device designed to avoid detection of the breaches of the EO and ER; they did nothing to legalise an illegal activity. Exhibits 5(a) and 5(b) of the 1st defendant's affidavit, his own account and, as well, that of Miss Yiu at paragraph 66, are all clear and obvious indications that despite the presence of a qualified teacher, it was the 1st defendant who was conducting the classes, and they were over-sized.

51.I am satisfied that the contract in question is void for illegality ab initio and in the performance; thus my answer to the question posed as to whether there is a serious question to try is:- 'No, there is not.'

The Consequences

52.It follows that there is no need to embark on where the balance of convenience lies; that and all other matters fall away and the application for injunctive relief must fail.

The Result

53.The plaintiff's applications for interim injunctions against both 1st and 2nd defendants are dismissed. Costs of both defendants are to be met by the plaintiff, to be taxed and paid forthwith. (The order for costs is nisi at first instance).

Representation:

Sir John Swaine, SC leading Mr T Au, instructed by Messrs Sit, Fung, Kwong and Shum, for the Plaintiff

Mr L Ng, instructed by Messrs Or, Ng and Chan, for the 1st and 2nd Defendants