Houston Christine Marie v. Tasa International Ltd. and Others
Read the full judgment text of HCA 10623/1997 on BabelCite. This High Court CFI judgment was delivered on 31 October 1997.
1. At the hearing on 31 October 1997, the Plaintiff applied for a continuation of the interim injunction granted by Rogers J. on 9 October 1997 at least until 15 December 1997. After hearing counsel for the parties, I discharged the injunction. The reasons appear below.
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HCA010623/1997 1997, No.A10623 IN THE HIGH COURT OF HONG KONG COURT OF FIRST INSTANCE ---------------
--------------- Coram : The Hon Mrs Justice Le Pichon in Chambers Date of Hearing : 31 October 1997 Date of Decision : 31 October 1997 Date of Handing Down Reasons : 10 November 1997 --------------------- R E A S O N S ---------------------- 1. At the hearing on 31 October 1997, the Plaintiff applied for a continuation of the interim injunction granted by Rogers J. on 9 October 1997 at least until 15 December 1997. After hearing counsel for the parties, I discharged the injunction. The reasons appear below. 2. The Plaintiff is a member of the TASA International Partnership ("TASA") which was formed in 1984. The Plaintiff did not become a partner until 1990. Although the Partnership Agreement which she signed cannot be located, the form of Partnership Agreement that was in use at the time the Plaintiff became a partner is in evidence. The original Partnership Agreement has been amended a number of times, but there is evidence from the Administrative Partner of TASA who has been involved since 1984 that every "edition" of the Partnership Agreement contains an "Arbitration and Applicable Law Clause" which provides as follows :
3. TASA is an international partnership engaged in executive search services through a worldwide Group of Offices. It is stated in the Partnership Agreement that the Partnership is a "legal entity established ... in accordance with section 530 et. seq. Swiss Code of Obligations". The 1st Defendant is a company incorporated in Hong Kong used to conduct TASA's business in Hong Kong and the 2nd Defendant is the holding company which owns the 1st Defendant. The 3rd Defendant is sued on behalf of himself and all other partners of TASA other than the Plaintiff. Service on the 2nd and 3rd Defendants is challenged and this is an issue which falls to be decided on another occasion. 4. The Plaintiff transferred from TASA's New York office to its Hong Kong office in April 1994. Until recent events, she was the Managing Partner. She has been described by her counsel as the "engine of profit" of the Hong Kong office. In the 1993 financial year, prior to the Plaintiff transferring to Hong Kong, the billings of the Hong Kong office were approximately $5 million. In 1994, it increased to $9.3 million. The figures for 1995 and 1996 were $17.3 million and $20.5 million respectively. For the first seven months of 1997, the billings were $12.7 million. The Plaintiff claims that she is responsible, on average, for 80% of the billings. 5. Since the beginning of this year, the Plaintiff's relationship with TASA has been less than happy. It began with the discontinuance of a housing allowance of US$150,000 per annum that had been paid to the Plaintiff during the years 1995 and 1996. This grievance brought out another complaint which also had a financial impact on the Plaintiff, namely, the removal of the cap on contributions from partners at US$800,000. The cap was apparently removed back in 1995. The Plaintiff asserts that the removal was made "without any approval by the partners or the Board of TASA." It is to be noted that the removal of the cap affected the partners worldwide and was not restricted in its operation to the Plaintiff. 6. In early March 1997 the Plaintiff intimated to Mr Michael Squires, the Chairman of the 2nd Defendant and Chief Executive of TASA as well as Mr Peter Magnet, the Administrative Partner of TASA that she would seriously consider leaving TASA if the cost of living allowance was not reinstated. This was followed up in a memorandum on 17 June 1997 when both the discontinuance of the cost of living allowance and the removal of the cap were specifically raised. 7. Matters came to a head in September in Singapore. The Plaintiff had a number of meetings on 5 and 6 September in Singapore with various TASA partners including Messrs Squires, Ingersoll (TASA's Chairman), Magnet and deKesel. There is a dispute as to whether the Plaintiff actually resigned as opposed to merely threatening to resign at one of the meetings held on 5""" September. Under the Partnership Agreement, any partner can resign from the partnership by giving two months' notice. So if the Plaintiff did resign, her resignation would be effective as of 5 November 1997. There were further meetings in Hong Kong in the second week of September but the parties were unable to resolve their differences. 8. To complete the chronology, it is relevant to mention that from 13 September till 15 October 1997, the Plaintiff was on sick leave. There are certificates dated 13 and 23 September from the Plaintiff's doctor to the effect that the Plaintiff was suffering from a stress-related disorder such that in the doctor's opinion, she was temporarily and totally disabled and could not return to work during that period. 9. On 22 September when the Plaintiff was still on sick leave, TASA wrote reiterating its views that the Plaintiff's resignation on 5 September was valid and binding and had been accepted by the Partnership. TASA also confirmed that they expected the Plaintiff to continue to discharge her duties up to 5 November 1997. On 30 September, the Plaintiff wrote at length to the Board of the holding company, i.e. the 2nd Defendant. On 6 October the Plaintiff was informed that as at 19 September the Board exercised its authority under the provisions of the Partnership Agreement to remove her as Managing Partner of the Hong Kong office. Her removal was without prejudice to her remaining as a partner until the conclusion of her notice period on 5 November. The writ together with the statement of claim was issued on 8 October and the matter came before Rogers J. the following day. 10. The Plaintiff asserts that she has been wrongfully excluded from TASA and its Hong Kong office. Her claim is for an injunction to restrain the Defendants from acting in any way inconsistent with her rights as a partner in TASA. The application came before Rogers J. on 9 October. 11. After hearing counsel for both parties, the learned judge granted limited interim relief giving the Plaintiff access to the 1st Defendant's office but for a two-week period only commencing with her return from sick leave until the return date for the hearing of the inter partes summons. The operative paragraph reads :
Directions were given as to the filing of evidence by the parties. 12. On 10 October the Board met and resolved inter alia (without prejudice to its 19 September decision) to remove the Plaintiff as Managing Partner of the Hong Kong office and to exclude her from the Partnership on the expiry of two months from the date of written notification to her of the Board's decision. They also appointed Fred Rijke as the new Managing Partner of the Hong Kong office. 13. Messrs Squires, Magnet and Ingersoll filed affidavits for and on behalf of the Defendants. The Plaintiff filed two further affidavits on 28 and 29 October respectively. A second affidavit was filed by Mr Squires the day before the hearing to deal with the events since the Plaintiff returned to the 1st Defendant's office on 15 October 1997. Interim relief 14. The basis of the Plaintiff's application for the continuation of interim relief is that under Swiss law, a resignation pursuant to the partnership provision is not effective unless it is in writing. Any resignation made orally by the Plaintiff on 5 September (which the Plaintiff denies) is ineffective and the earliest date on which her status as partner could cease is two months from the date of written notice to her of the Board's resolution to remove her assuming such resolution to be valid. There are intimations that the validity of that resolution is likely to be challenged by the Plaintiff who has adduced an opinion from a Swiss lawyer to the effect that the power cannot be validly exercised unless there is good cause. The Plaintiff's case is that so long as she remains a partner, she has a right not to be denied access to the office or to continue to work as a partner. It was submitted that her object in seeking a continuation of the interim relief granted is to preserve her status as partner and thereby her ability to contribute to and share in the profits of the Hong Kong office pending determination of the question as to the validity of her purported resignation/exclusion either by arbitration in Zurich or, if no stay is ordered or agreed, by this court. 15. As counsel for the Plaintiff acknowledged, the main issue before me is whether damages would or would not be an adequate remedy. He referred to the Plaintiff's track record since coming to the Hong Kong office and it was uncontroverted that as much as 75-80% of the billings were generated by her. Since the "misunderstanding" over the 5 September meeting in Singapore, the Plaintiff has been off work for a time and has suffered health problems. The Hong Kong office has not been able to function normally and for the month of September, it sustained a loss. The Plaintiff seeks to attribute this state of affairs to the Partnership in that it has not sent someone here to deal with the business on a full-time basis. If the Hong Kong office is not making money, it would inevitably reduce the pool of profits in which the Plaintiff has an interest. It was also suggested that there are outstanding assignments which the Defendants have simply not dealt with. 16. The Defendants oppose the Plaintiff's application. Counsel for the Defendants submits that as the Partnership Agreement is governed by Swiss law, proceedings ought never to have been commenced here, the proper forum for disputes between the Plaintiff and the Partnership being the Court of Arbitration in Zurich. The commencement of proceedings in the Hong Kong court by the Plaintiff was plainly in breach of the arbitration provision in the Partnership Agreement. Since the interim relief the Plaintiff seeks is ancillary to a foreign arbitration, it is incumbent on the Plaintiff to establish serious and irreparable damage. 17. Counsel for the Defendants referred to The Lady Muriel [1995] 2 HKC 320. In that case the Court of Appeal held that where a party to an international commercial arbitration to be determined outside Hong Kong sought an "interim measure of protection" from the Hong Kong court without obtaining the approval of the arbitrators, the Hong Kong court should refuse the application unless satisfied that the justice of the case necessitates the grant of the relief in order to prevent what may be serious and irreparable damage to the position of the applicant in the arbitration. Thus, while the Hong Kong court has inherent jurisdiction to grant interim protection in aid of a foreign arbitration, it is plain that the court should be "very cautious about granting such relief." The Defendants submit that the Plaintiff's strategy in the present case appears to be to by-pass the Zurich arbitration that is provided for in the Partnership Agreement : even now the Plaintiff has taken no steps to commence arbitration proceedings in accordance with the provisions of the Partnership Agreement. Rather, she has chosen to commence proceedings in Hong Kong and nowhere else. 18. Whilst no foreign arbitrator is yet seized of the matter because the Plaintiff has chosen not to refer the dispute to arbitration, she cannot claim to be in a better position than if she had abided by the provisions of the Partnership Agreement. The Hong Kong court when considering whether or not ancillary relief should be granted must, it seems to me, exercise the caution that it would have done had the Plaintiff proceeded in accordance with the express provisions of the Partnership Agreement. As appears from The Lady Muriel, it is not sufficient that it would be "just and convenient" to make the order sought : the court would have to be satisfied, beyond a peradventure, that serious and irreparable damage would be suffered if the order were not made. 19. It is with those principles in mind that I approach the present application to continue the interim injunction for a further few weeks. 20. It is necessary at this stage to refer to Mr Squires' second affidavit which deals with events since the Plaintiff's return to the office. The Managing Partner of the Hong Kong office is Mr Rijke and he has held that position since 10 October 1997. He was in Hong Kong between 13 and 24 October and is due to return in mid-November. Mr Squires is staying in the Hong Kong office in the interim. 21. Putting it mildly, the Plaintiff's conduct since returning to the office has been less than satisfactory from TASA's point of view. It prompted Mr Rijke to send a memorandum on 28 October to the Plaintiff setting out the respects in which the Partnership considered the Plaintiff's conduct to be less than satisfactory. In fact it is alleged that her conduct has been detrimental to the financial position and good conduct of the office. The memorandum refers to specific instances where the Plaintiff unilaterally and without any consultation with those now running the Hong Kong office cancelled invoices to clients. The aggregate value of the cancelled invoices is approximately $200,000. The Defendants say that it is astonishing that the Plaintiff should have written to Standard Chartered Bank in connection with an assignment that "we have exhausted the universe of credit operations professionals." Other complaints include the giving of conflicting instructions to staff, erratic and unsatisfactory time-keeping since returning from sick leave, refusal to meet with Mr Squires to discuss the September monthly accounts in the absence of the Plaintiff's lawyer and despite her removal as Managing Partner, the Plaintiff has continued to use her Managing Partner letterhead when writing to clients. Mr Rijke felt the need to set out very specific guidelines for the Plaintiff's future conduct until such time as she leaves the firm. There has been no response from the Plaintiff to Mr Rijke's memorandum and in a telephone conversation between Mr Rijke and the Plaintiff on 30 October, it is alleged that she informed him that she had no intention of following his instructions. At the hearing, the Plaintiff through her counsel offered an undertaking not to hold herself out as the Managing Partner should the injunction be continued. This is clear admission on the Plaintiff's part that the Defendants' complaint in this regard is justified. The Plaintiff is also apparently prepared to report to Mr Rijke twice a week, that being the extent to which she is willing to go to meet his requirements as regards "future conduct", spelt out in the 28 October memorandum. 22. Whilst there are allegations and counter-allegations the merits of which cannot be gone into at this hearing, it is apparent from the affidavit of Mr Squires as well as the Plaintiff's second and third affidavits that there is palpable tension and strain in the office. The dispute between the parties has worsened since the hearing before Rogers J : positions have become more polarized and confrontational. This has inevitably given rise to problems of conflicting loyalties for staff members who feel themselves caught in a difficult situation that is not of their choosing. On the business front, differences of opinion between the Plaintiff and the new Managing Partner have arisen and are likely to continue given the nature of the business and the way the dispute between the parties has evolved. Here there is virtually no prospect of an orderly handover and a smooth transition. The Plaintiff has made plain her intention to set up in competition as and when her departure takes effect. It is of course understandable that she would wish to make contingency plans : equally, it is understandable that the Defendants have considerable concern over the Plaintiff's access to what they perceive to be confidential information. That the relationship would return to normal, i.e. as it existed prior to matters coming to a head in September, is wishful thinking. Both sides are suspicious of the other's intent and conduct. The fact is that a working relationship between the parties no longer exists and the bond of mutual trust and confidence underpinning such a relationship has long since evaporated. 23. I am not satisfied that the Plaintiff will suffer irreparable damage if the interim relief granted is not continued. The "damage" articulated is in substance financial in nature. Should it transpire at the end of the day that the Defendants have acted in breach of the Partnership Agreement in any way, damages would extend to any loss that may be sustained by the Plaintiff in not having been in a position to generate profits. Whilst experts may differ as to the formula to be used, I do not see that it is impossible for experts to devise appropriate formulae or projections based on the Plaintiff's performance in Hong Kong over the last few years to calculate such profits and consequentially, the Plaintiff's loss. 24. It has to be recognized that the reality of granting the injunction is to compel parties to continue to work together when they are suspicious and distrustful of each other. Where mutual trust and confidence have genuinely gone, the court would not readily grant an injunction. See Warren v. Mendy [1989] 1 WLR 853 at 867G. Having regard to the matters and the principles mentioned above, and in particular to the fact that serious and irreparable damage have not been established, it would not be a proper exercise of the court's discretion to continue the injunction and so foist upon the parties a working relationship where, in truth, none exists.
Representation: Mr Paul Carolan, inst'd by M/s Horvath & Giles, for Plaintiff Mr Simon Westbrook, inst'd by M/s Fairbairn Catley Low & Kong, for 1st and 3rd Defendants |