Alpha (Asia) Ltd v. Dyno Nobel Hong Kong Ltd

HCA1501/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1501 OF 2007

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BETWEEN

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Before : Mr Recorder Shieh, SC in Chambers

Date of Hearing : 7 September 2007

Date of Judgment : 7 November 2007

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J U D G M E N T

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Procedural background

1.The Writ in this action was issued on 12 July 2007.  On the same day, the plaintiff obtained from Deputy Judge To an ex parte injunction :

(1)	restraining the defendant from removing Titan 3000 emulsion and sensitizers contained in two tanks labelled as “N17” and “NL10” all located within the works site of KWP Quarry Company Limited at Anderson Road Quarry, Tai Sheung Tok, New Territories, Hong Kong unless with the plaintiff’s prior written consent; and
(2)	restraining the defendant from breaching a Distribution Agreement dated 15 May 2001 entered into between the plaintiff and the defendant (“the Distribution Agreement”)by ceasing its supply of explosives known as Titan 3000 to the plaintiff.

2.By a summons dated issued on 13 July 2007 (“the Plaintiff’s Summons”),the plaintiff sought an inter partes injunction in the same terms as the ex parte injunction.  At the hearing before me, Mr Jonathan Wong for the plaintiff accepted that the reference to “NL 10” in the original injunction (and in the Plaintiff’s Summons) should be a reference to “NL 3”.  I shall take this as an oral application to amend the Plaintiff’s Summons which, in the absence of any opposition, I allow.

3.On 20 July 2007, Sakhrani J discharged the ex parte injunction upon receiving undertakings from the defendant (in effectively the same terms as the ex parte injunction – there are slight differences in wording but I do not need to get into those for present purposes).  Sakhrani J gave directions for the filing of evidence and adjourned the Plaintiff’s Summons.  There were then further adjournments of the Plaintiff’s Summons.

4.The Plaintiff’s Summons finally came before me on 7 September 2007, when I heard submissions from the parties.  This is my decision.

The facts

5.The defendant is a supplier of bulk explosive products in Hong Kong.  On 15 May 2001 it entered into the Distribution Agreement with the plaintiff.

6.Under the Distribution Agreement, among other things, the plaintiff was to be the exclusive distributor in Hong Kong of “the Goods” as defined in the Distribution Agreement.  The meaning of “Goods” is defined by reference to a Supply Agreement (“the Supply Agreement”) of the same date and signed between the same parties.  The Supply Agreement was in fact annexed to (and formed part of) the Distribution Agreement.  There was in fact also a “Services Agreement” annexed to the Distribution Agreement but that is not material for this application and I shall say nothing about it. 

7.Under the Supply Agreement, the defendant agreed to supply “the Goods” to the plaintiff on terms stipulated therein.  The “Goods” were defined by reference to Annexure A.  Annexure A provided, materially :

8.Annexure A went on to provide :

“	Specification for emulsion explosives
	The same as that being supplied in Hong Kong in the month of May 2001 which [the defendant] specifies as :-
	Authorised Shipping Name:	Oxidising Liquid NOS
	Product Name:	Titan 3000 Emulsion
	Chemical Description:	Water-in-Oil Emulsion
	Appearance:	Red Viscous Liquid
	U.N. number:	3139
	Dangerous Goods Classification:	5.1 Oxidising Agent
	Packaging Group:	III
	Hazchem Code:	1YE
	Specific Gravity:	1.36-1.40 g/cc
	Viscosity:	32,000 – 38,000 CPS”

9.The plaintiff had contractual commitments with its own customers, namely KWP Quarry Company Limited (“KWP”) and Shek O Quarry (“Shek O”).  Products ordered from and supplied by the defendant were used to satisfy orders from these two customers. 

10.I digress slightly here to mention a few points about the process of manufacturing bulk explosives.  On a very high level of generality (and materially for this case), main ingredients of bulk explosives are (i) emulsion (or emulsion matrix); (ii) ammonium nitrate; fuel oil and sensitizers.  These ingredients would be mixed and processed to become bulk explosives (or “emulsion blends”).  This is mentioned here because some of the problems with this application arose because of the fact that “Titan 3000”, a phrase mentioned in the Plaintiff’s Summons and in the Supply Agreement, could mean (i) a brand of bulk explosives and (ii) a brand of emulsion used to make bulk explosives.  To complicate things slightly, it is the plaintiff’s case that, to manufacture the Titan 3000 brand of bulk explosives, one does not necessarily have to use the Titan 3000 brand of emulsion.

11.In practice, the plaintiff did not play any part in the physical delivery of the products and the processing/handling of the products on-site.  What occurred was that (taking the KWP site by way of example) the defendant would deliver its product to the quarry site, where they would be stored in a depot and processed as and when required.

12.By letter dated 25 June 2007 (but said by the plaintiff to have been received by it only on 5 July 2007), the defendant informed the plaintiff that the Titan 3000 emulsion product would be converted to EP Gold with immediate effect.  The letter went on to say that EP Gold was a substitute product, and it would be supplied on the same terms and conditions as those set out under the Supply Agreement.  The premise of this letter is that the defendant was, up to that point of time, supplying Titan 3000 emulsion to the plaintiff.  As we now know (and this is not disputed), in fact since June 2006 the defendant has ceased supplying Titan 3000 emulsion, but had in fact been supplying another brand of emulsion called Emulsion 1000 LD to the plaintiff, with the latter’s knowledge and approval.  I shall say more about this later.

13.By way of background, the sole supplier of EP Gold was a company called Orica Limited.  Since around June 2006 (or December 2005, the precise date does not matter for present purposes), the defendant had been owned by Orica.  What happened was, therefore, that by the 25 June 2007 letter, the defendant was indicating an intention to use a product supplied by its parent company.

14.By letter dated 7 July 2007, the plaintiff objected to the defendant’s intended supply of EP Gold.  The matter could not be resolved : hence this action and the ex parte application which led to the ex parte injunction.

15.As I said above, in fact before the sending of the 25 June 2007 letter, the defendant had (since about June 2006) not been supplying Titan 3000 emulsion to the plaintiff but had been supplying a different emulsion called Emulsion 1000 LD (imported from a Malaysian firm called Tenaga Kimia Sdn Bhd).  This was said to be because the Australian manufacturer of Titan 3000 was unwilling to continue supplying the product to the defendant.  This change was made with the knowledge of Mr C.M. Wong, a director of the plaintiff and the chief deponent for the plaintiff in these proceedings.  A sample purchase order for EP Gold dated 9 January 2007 has been produced in evidence, bearing Mr C.M. Wong’s signature.  I shall explain the significance of this fact later in this judgment.

The arguments and the issues

16.Mr Jonathan Wong conceded that paragraph 2 of the Plaintiff’s Summons, which reflects that part of the ex parte injunction set out in paragraph 1(b) above, is in the nature of an interlocutory mandatory injunction.  In my view that concession is rightly made, for although framed in a negative way, the effect of that part of the injunction is to require the defendant to perform a positive act by way of procuring and making supply of one kind of product  In effect, that part of the Plaintiff’s Summons is seeking a form of interlocutory specific performance.

17.The nature of the application means that in terms of the “merits” threshold for the application, instead of showing a “serious issue to be tried” the plaintiff has to show that there is a “high degree of assurance” that at trial it would appear that the injunction was rightly granted (see Shepherd Homes Ltd v. Sandham [1971] Ch 340 at 351 per Megarry J, cited with approval by Mustill LJ in Locabail International Finance Ltd v. Agroexport & Another [1986] 1 WLR 657 at 664A-D, remarking that Megarry J’s judgment was unaffected by American Cyanamid Co. Ethicon [1975] AC 396).  Such injunctions are also to be approached with caution and granted only in a clear case.

18.The plaintiff did not seriously dispute the application of this test, but contended that on the facts it had passed this hurdle.

19.I should add that although, technically speaking, paragraph 1 of the Plaintiff’s Summons is still in the nature of a prohibitory interlocutory injunction, looked at “in the round” there is no scope for an independent existence of an injunction based on paragraph 1 only.  In other words, if the plaintiff does not succeed in obtaining an order in terms of paragraph 2, it will serve little or no purpose for the plaintiff simply to obtain an order along the lines of paragraph 1, namely to restrain the defendant from removing the contents of the two tanks in question.  In a sense, the injunction sought in paragraph 2 of the Plaintiff’s Summons is the dominant one, and no submission has been made to me by the plaintiff that, somehow, different tests for the “merits threshold” should be applied to paragraph 1 and paragraph 2 of the Plaintiff’s Summons.

20.The plaintiff’s arguments in support of its application can be put briefly as follows :

(1)	EP Gold emulsion was a different type of product from Titan 3000 emulsion.  One major difference is that EP Gold emulsion had a much higher viscosity than Titan 3000 emulsion.  In this connection the plaintiff relies on a memo composed by one Mr Archie Cheung (of the defendant) in which certain problems with EP Gold were raised.
(2)	The Plaintiff’s Summons referred to “Titan 3000” and the defendant has (see below) raised an argument that the Plaintiff’s Summons is flawed on its face because the defendant has ceased supply of Titan 3000 Emulsion for some time (and with the plaintiff’s knowledge and approval) already.  In response, the plaintiff says that what it seeks by way of relief is not delivery of Titan 3000 emulsion, but the “Titan 3000” brand of bulk explosives.  It is also the plaintiff’s case that the Titan 3000 series of explosives can also be made by using Titan 3000 Emulsion or Emulsion 1000 LD.  The fact that Emulsion 1000 LD had been delivered instead of Titan 3000 Emulsion, therefore, did not preclude the plaintiff from seeking the Titan 3000 brand of end product.
(3)	EP Gold, on the other hand, was (according to Mr C.M. Wong) an ingredient which was used to manufacturing a different brand (or type) of bulk explosives known as Powergel 2500.  Mr Wong did not categorically say that EP Gold could not be used to manufacture Titan 3000 brand of bulk explosives.  Reading his evidence in context, I think what is being asserted is that EP Gold emulsion is different from Titan 3000 emulsion and Emulsion 1000 LD and, in the absence of further information it is not possible to tell whether EP Gold could be a proper substitute (see further below on arguments as to whether EP Gold could be a proper substitute).
(4)	Clause 21 of the Supply Agreement provided for the possibility of a variation or re-renegotiation of the terms of the Supply Agreement if there is a substantial change in circumstances affecting either party that it would impose hardship.  But no such hardship has arisen in this case.
(5)	Even assuming (for the sake of argument) that under the Supply Agreement the plaintiff was entitled to supply a substitute product (this is because in Annexure B of the Supply Agreement dealing with “Price Adjustment Mechanism” there is a reference to Titan 3000 emulsion “or substitute”, thereby supporting a possible argument that the Supply Agreement itself contemplated that substitute products could be supplied), the defendant was not entitled to freely substitute anything it wanted.  The Distribution Agreement and Supply Agreement contained various provisions dealing with government approvals and test results (such as calibration and viscosity) which had to be obtained or provided by the defendant (see e.g. clause 13 of the Supply Agreement dealing with provision of test results; clause 1.11 of the Distribution Agreement dealing with obtaining of government approvals) and the defendant has not done that in relation to EP Gold.  The plaintiff complained that even after its objection to the defendant’s intended change of products, the defendant had made no attempt to satisfy the plaintiff that EP Gold was a proper substitute product.
(6)	In this connection, the plaintiff contended that Titan 3000 emulsion and EP Gold emulsion were not interchangeable.  A number of technical and safety issues will arise if it is sought to change Titan 3000 to EP Gold in the explosives manufacturing process.  By way of example, Titan 3000 emulsion (and Emulsion 1000 LD) was commonly handled and processed by a type of manufacturing vehicles called “TTT” (shorthand for “Triple Threats Trucks”).  Instruments/settings on these trucks were all set to cater for the particular type of emulsion being processed.  Matters such as viscosity of the emulsion were important matters in the manufacturing of explosives.  Because EP Gold had a higher viscosity, if TTT were to be used to process/handle it, a number of technical adjustments (e.g. re-calibrations) would have to be made and even then, safety issues might still arise and certain parts of TTT might not be compatible with the formulation of a non-Titan 3000 emulsion.  The above is not an exhaustive list of the sort of problems which might arise if there was a “switch” from one to the other, and the problems were not simply referable to the difference in viscosity between Titan 3000 and EP Gold.  As I said, the above was set out by way of example only.  The possible technical/safety problems and issues were detailed in the 2nd and 3rd affirmations of Mr C.M. Wong (save perhaps for exhibiting the memo signed by Archie Cheung, the 1st affirmation of Mr C.M. Wong did not really seek to deal with the technical and safety issues in any detail) as well as the affidavit of Mr Magub, all filed for the plaintiff.
(7)	The plaintiff complained that the defendant has, despite objections from the plaintiff, still not satisfied the plaintiff that EP Gold was a proper substitute product for Titan 3000.  Mr Wong said that if the plaintiff could obtain the relevant technical information (about the product itself and about any re-calibration) and if the plaintiff could get a proper opportunity to consider it and perhaps successfully persuade its customers to accept the new emulsion, then there would be no cause for complaint.
(8)	The plaintiff further contends that damages would not be an adequate remedy, because the issue of damages in the sale of goods context would only arise if there is a market from which a substitute product could be acquired by the plaintiff.  Here, the plaintiff says that the defendant was the only supplier of Titan 3000 in Hong Kong and the plaintiff would not be able to source Titan 3000 elsewhere.  It is also contended that if the plaintiff was unable to supply Titan 3000 to KWP and Shek O, these two might be rendered in breach of their own contracts with their own customers; they would then pass on such liability to the plaintiff.  This would seriously harm the plaintiff’s business and reputation.

21.The defendant’s arguments in opposition to the plaintiff’s application can be briefly summarized as follows :-

(1)	For the past year or so, the defendant has in fact already been supplying an emulsion that is not Titan 3000 emulsion.  As I said above, since June 2006 the defendant has been supplying an emulsion called Emulsion 1000 LD.  Therefore factually the plaintiff is, prior to the ex parte injunction, not getting Titan 3000 emulsion anyway.  Insofar as the Plaintiff’s Summons requires the defendant not to “cease” its supply of Titan 3000 emulsion, this was based on a wrong factual premise because there was no supply of Titan 3000 emulsion to “cease”.
(2)	The plaintiff has not raised any objection to the switch to Emulsion LD1000 and there is no evidence that the plaintiff’s customers had raised any objections.  This undermines any “doomsday scenario” portrayed by the plaintiff (in terms of safety risks) in the event that there was a change in the emulsion used in the manufacturing process.  It also undermines any suggestion that a further change from Emulsion LD1000 to EP Gold emulsion would cause problems for the plaintiff’s customers.
(3)	The defendant disputes any suggestion that EP Gold emulsion was not a proper substitute for Titan 3000 emulsion and Emulsion LD1000.  It disputes the suggestion that the viscosity of EP Gold emulsion was far higher than Titan 3000 emulsion.  On its case, the viscosity of EP Gold emulsion is only about 10% higher than Titan 3000 emulsion, which is lower than that contended by the plaintiff.  It contends that EP Gold has in the past been used in the defendant’s TTT without any safety or technical problems.  It also disputes that there would be any safety risks associated with the change to EP Gold.  Again, the above is not an exhaustive account of the defendant’s dispute with the plaintiff over the technical and safety issues.  The matter is the subject of expert evidence of Mr Leed filed on behalf of the defendant, as well as subject of the affirmation of Mr Ngai Chi To.
(4)	Damages would be an adequate remedy.  There were two other licensed importers of explosives emulsions in Hong Kong and the plaintiff could have approached them to import Titan 3000 (and claimed the difference in price by way of damages).  Though the plaintiff had put in evidence from Mr C.M. Wong suggesting that one of the two suppliers is currently not supplying bulk explosives and the other one has not yet supplied bulk explosives as of the date of his 1st affirmation (in support of the ex parte injunction), the defendant maintained that there was nothing to prevent the plaintiff from going to those two importers to ask them to import Titan 3000 (or Emulsion 1000 LD).

22.As in most cases of interlocutory injunctions, there are sub-issues within issues and sometimes peripheral issues are raised (in this case, such as the issue of whether Archie Cheung, whose memo is now relied on by the plaintiff against the defendant, really had his loyalties towards the defendant or the plaintiff and the issue of whether the plaintiff’s application had been brought for an ulterior motive).  I hope I will be forgiven for not rehearsing all such evidence and the respective responses.  Bearing in mind that this is only a judgment in an application for interlocutory injunction, it would be inappropriate for me to spend an inordinate amount of time and space dealing with all the niceties and nuances of the evidence.  For the avoidance of doubt, I have re-read all the affidavits/affirmations filed by the parties namely those of C.M. Wong and Mr Magub (filed on behalf of the plaintiff) and those of Mr Ngai Chi To and Mr Leed (filed on behalf of the defendant) and reminded myself of their contents.

Discussion and decision

23.Having considered the rival evidence and arguments, I am not satisfied that this is a case in which I should exercise my discretion in favour of granting the injunction sought in the Plaintiff’s Summons and I will therefore accordingly dismiss the Plaintiff’s Summons as well as discharge the defendant’s undertakings previously given to the Court.  My reasons are as follows.

24.First, I am not satisfied that the strength of the plaintiff’s case, on the basis of affidavit evidence and on the basis of arguments at an interlocutory stage, is such that there is a “high degree of assurance” that the injunction would at trial be shown to be rightly granted.

25.Dealing first with the plaintiff’s case that it is entitled to delivery of (and that it is really seeking in this application) the Titan 3000 “branded series” of bulk explosives (which could be made by Titan 3000 emulsion or Emulsion 1000 LD), the starting point must be the Supply Agreement itself.

26.Under the Supply Agreement, it would appear that the defendant’s obligation was defined by reference to supply of types of emulsion, not a particular “branded series” of end product.  In his connection I refer to the “Specification for emulsion explosives” which described the “product name” as “Titan 3000 Emulsion”; see also the price adjustment mechanism at Annexure B, referring to the prices for Titan 3000 emulsion or substitute.  Also, based on a comparison of the description of the “Goods” in section 1 of Annexure A with a diagram exhibited by Mr C.M. Wong as “WCM-13”, it would appear that the reference to Titan 3000 in Annexure A (defining the “Goods”) is a reference to Titan 3000 as an emulsion rather than Titan 3000 as a branded end product.  The two items in section 1 of Annexure A happened to coincide with the two essential raw materials described in WCM-13 for the making of explosives). 

27.The plaintiff may wish to argue otherwise (i.e. that the Supply Agreement was for the supply of a branded end product and that gives it the entitlement to seek relief by reference to a branded end product), but there is at most a serious issue to be tried on this.  I am not persuaded of any higher prospects of success on this point, as things now stand.

28.More fundamentally, I feel uneasy about the notion that there was an entitlement to an end product by reference to a brand name (Titan 3000) which, according to the plaintiff, can be manufactured by using Titan 3000 emulsion or Emulsion 1000 LD.

(1)

The defendant does not accept that Titan 3000 end product was or could be made from Emulsion 1000 LD.  The assertion by the plaintiff (through the 2nd affirmation of Mr C.M. Wong at paragraph 20) is also not borne out by the underlying document which the deponent referred to.  In paragraph 20 of his 2nd affirmation, Mr C.M. Wong said that he was given to understand that the end product arising from Emulsion 1000 LD would “still be of the Titan 3000 brand series”, and then he referred to the Technical Information of Titan 3000 Brand Series in support.  But having looked at that document (exhibited to Mr C.M. Wong’s 2nd affirmation) I cannot find anything in it to support Mr C.M. Wong’s suggestion that Titan 3000 series of explosives could be manufactured by using Emulsion 1000 LD.

(2)

Further, I find it somewhat difficult to see how the plaintiff can, in effect, say that it wanted an end product by reference to its brand name and that the particular brand name product could only be made from one of two branded emulsions.  A brand name is only a brand name and there is no law saying that a particular brand name product must be made in a particular way.  If, say, the proprietor of the Titan 3000 brand of bulk explosives were to change the composition and manufacturing process of Titan 3000 explosives now, so that EP Gold emulsion and MMU (“Mobile Manufacturing Unit” which, according to Mr C.M. Wong, was a system of trucks/vehicles associated with the processing of EP Gold but not Titan 3000 Emulsion) would be used in the manufacturing process instead of Titan 3000 emulsion, I presume that the plaintiff would object.  But one then asks “why?”  The only basis for the plaintiff to object was that it was not the “name” of the final product that matters, but the underlying characteristics and ingredients.  So, at the end of the day, the plaintiff’s real case (no matter how it now presents it, for forensic purposes) is based on an entitlement to a particular type of emulsion.

29.There is an issue as to whether the defendant was obliged to supply only the “Goods” identified in the Supply Agreement or whether it is entitled to substitute (without having to establish any antecedent reasons) the product by an “equivalent” (in terms of, say, function or quality).  It is correct that the defendant has not invoked the “hardship” mechanism” in clause 21.1 of the Supply Agreement to support a case that because it could no longer source a supply of Titan 3000 emulsion, therefore there was hardship and therefore it wanted to go through the re-negotiation process.  As a matter of objective fact, those steps contemplated by clause 21.1 has not taken place.  The defendant simply sought to introduce the change boldly, by way of entitlement.  However, as Mr Jonathan Wong fairly raised in the course of his oral argument, the price adjustment mechanism in clause 1(a) of Annexure B to the Supply Agreement expressly contemplated there to be the possibility of “substitute” for the “Goods” as defined and this could support a construction that the defendant was entitled to deliver a substitute. 

30.Now it may be said that this possibility of a “substitute” was only be intended to cover the scenario where the parties had re-negotiated a “substitute” in case the clause 21.1 “hardship” procedure is invoked but not otherwise.  I can well see the force of this argument.  If this argument is accepted, that it is not open to the defendant (for its own commercial reasons : either to keep the supply of goods “in house” or because it is “cheaper” for it to supply EP Gold than Emulsion 1000 LD, or both) to unilaterally change the emulsion even if the emulsion could properly be called a substitute.  But I can equally see any argument that the reference to “substitute” in clause 1(a) of Annexure B suggests a wider entitlement on the part of the defendant to supply a “substitute” as long as it was a proper substitute in terms of technical requirements, etc.  There is a serious issue to be tried as to whether the defendant was entitled to supply a substitute.  It may even be that the plaintiff has a slightly better argument on paper at this stage.  But I do not feel that it has reached the threshold of a “high degree of assurance”. 

31.As to whether EP Gold was a proper substitute (for either Titan 3000 or Emulsion 1000 LD), the evidence is in conflict on issues such as viscosity as well as technical and safety issues (such as whether EP Gold could safely be used in TTTs, whether such use could only be done with consequential re-calibration and adjustments and whether such steps could or could readily be accomplished by the defendant in the present case).  I pause to note here that the plaintiff’s evidence is directed not so much as towards showing that EP Gold was indeed unsafe, or that any technical re-calibrations and other changes necessitated by the change to EP Gold could not be accomplished.  I do not think that the plaintiff is putting its case that high.  The plaintiff is saying, rather, that it would wish to know more (for example, Mr Magub put the matter by way of a list of information which he would like to know).  Insofar as the plaintiff is indeed saying that the evidence shows that EP Gold was unsafe or that the re-calibration and other technical changes simply could not be made, I do not think that it has reached the requisite threshold.  Assuming for the sake of argument that there is a serious issue to be tried on this, this is still not enough to justify the grant of the injunction.

32.This brings me to the plaintiff’s next argument, namely that even if there was a right to substitute an alternative product, the plaintiff ought first of all (before taking any unilateral step to switch from one product to another) to have consulted the defendant and to have provided whatever form of documents and information (or government approval or test results) to enable the plaintiff to form a view as to whether the alternative product is a proper substitute.  Though the Supply and Distribution Agreements contained provisions dealing with test results, government approvals and the like, they do not contain any express term on any such procedure, or mechanism for prior consultation, or supply of information, before introducing a substitute product.  The matter has therefore to be dealt with on the basis of an implied term.  Whether such an implied term (as to prior consultation with, and satisfaction of, the plaintiff by the defendant before a “substitute” can be supplied) should be implied and if so, what its limits are is a serious issue to be tried.  But again I cannot go any further than this at this stage.  I note that there is no evidence that when the emulsion was switched to Emulsion 1000 LD, there was any sort of prior consultation process.

33.The cumulative effect of all the above arguments and discussions make it impossible for me to feel a high degree of assurance at this stage that any interlocutory injunction granted now would turn out to be rightly granted at trial.

34.Further, I am not satisfied that it has been shown, for present purposes, that damages would not be an adequate remedy :-

(1)	The Supply Agreement is in the nature of a contract for the supply of goods.  The normal measure would be the difference between the contract price and the price at which the plaintiff would have to pay in the market for a substitute.  In this case, assuming that the plaintiff had to acquire Titan 3000 emulsion (or, for that matter, Emulsion 1000 LD) for the purpose of satisfying its customers, I am not persuaded that there was no available market.  The plaintiff’s evidence fell short of saying that it had made inquiries with the two “alternative” suppliers suggested by the defendant and that none of them was prepared to import Titan 3000 or Emulsion 1000 LD and sell it to the plaintiff.  The plaintiff’s evidence was only to the effect that one of those two was not “currently” selling bulk explosives, and the other one has “not yet supplied bulk explosives in the Hong Kong market as of the date of [Mr C.M. Wong’s] first affirmation.”  There is no evidence that these two importers would not supply, if asked.
(2)	Mr Jonathan Wong argued that it would in any event not be open to the plaintiff to order from those two suppliers because the Distribution Agreement with the plaintiff was an exclusive one.  But if the plaintiff is correct in its underlying contention, the defendant would be in breach of the Distribution Agreement, justifying the plaintiff in terminating the agreement, ordering the contract goods elsewhere and then claiming damages.
(3)	Even if there was no alternative supplier for the plaintiff to acquire Titan 3000 (or Emulsion 1000 LD), it still does not follow that damages would not be an adequate remedy.  On the plaintiff’s case, the defendant had contracted to supply one particular type of goods to the plaintiff.  The defendant must be aware that the plaintiff was not acquiring the goods for its own consumption but for the purpose of using them to satisfy its customer’s purposes/use.  There is therefore a respectable argument that, subject to arguments about foreseeability or contemplation (arguments which, when I mooted this point in the course of argument, Mr Jamieson for the defendant did not seriously raise), if the defendant’s unilateral “switch” to EP Gold had caused the plaintiff’s customers to make a claim against the plaintiff, the plaintiff would be able to pass on those claims to the defendant by way of damages for breach of the Supply Agreement.  Those damages would be quantifiable.
(4)	I should note that no issue has been made by the plaintiff out of the financial health of the defendant.
(5)	I am not satisfied on the basis of the materials before me that there is any real risk of the plaintiff’s customers “crying foul” about the supply of EP Gold or that there would be a catastrophic collapse of the plaintiff’s business.  The plaintiff’s contracts with Shek O and KWP have been disclosed in these proceedings.  Having perused them, it is not readily apparent that the plaintiff had bound itself to supply only Titan 3000 emulsion (or Titan 3000 series of explosives made from Titan 3000 emulsion) to the customers.  The definition of “Bulk Explosives” referred to “Titan ™ Bulk Emulsion (70/30 blend of Emulsion/ANFO).  It is not clear whether this definition meant only Titan 3000 emulsion or any other type of emulsion.  “Explosive Products” is defined as “Bulk Explosives, Packaged Products and Accessory Products sourced from [the defendant] or its approved suppliers”.  Clause 2.1 of the agreements for both customers referred to the possibility of the supply of “equivalent” products, subject to agreement between the plaintiff and the customer.  Now of course customers cannot be forced by the plaintiff to agree.  But if Emulsion 1000 LD (which on the face of it does not appear to be a “Titan TM Emulsion” within the definition of “Bulk Explosives”) has been used without incident and without objection, this tends to show that these customers were amenable to agreeing to the use of equivalents.  But as I said above, the plaintiff’s case now is not so much that these were not proper equivalents, but that it needed to know more before it could tell whether they were proper equivalents.  At most, therefore, it can say that it is possible that the customer might object, but then that is not enough for present purposes.

35.I now wish to come back to the question of the “merits threshold” discussed in Locabail.  I am aware that Hoffman J (as he then was) has, in the subsequent case of Films Rover International Ltd v. Cannon Film Sales Ltd [1987] 1 WLR 670 at 680G-681682D, said that Shepherd Homes and Locabail did not lay down any independent principle applicable to a separate form of injunction called “interlocutory mandatory injunction”, that they were intended to lay down a guideline only, that it was just another way of saying that the features which justify describing an injunction as “mandatory” would usually also have the consequence of creating a greater risk of injustice unless the court feels a high degree of assurance that the plaintiff would be able to establish his right at trial, and that the ultimate exercise is a consideration of the risk of injustice of an injunction is not granted.  But even with Hoffman J’s words in mind, and considering all the circumstances of this case in the round (as discussed in the above paragraphs), I am still not persuaded that the “balance of the risk of injustice” is in favour of granting the injunction sought by the plaintiff.

36.I therefore dismiss the Plaintiff’s Summons and discharge defendant’s undertakings, with a costs order nisi that the defendant is to have its costs.

37.I wish to make one further point on the issue of safety.  I think Mr Jamieson does have a point in that the issue of safety only came into focus in the plaintiff’s “second round” evidence (in the form of Mr C.M. Wong’s 2^nd affirmation).  In Mr C.M. Wong’s 1^st affirmation (in support of the ex parte injunction) the issue of safety was not raised.  That is not to say that I treat the issue of safety lightly.  But equally I cannot grant an injunction simply because the magic word “safety” is mentioned.  I have to proceed on the basis of the evidence that I had seen, and on the basis of what I had seen I cannot discern sufficient evidence of safety hazard.  If, upon receiving actual delivery of EP Gold and if, upon further examination of its qualities/attributes, it can be shown that there were indeed safety issues, then the plaintiff can no doubt make another application.  Mr Jamieson did not really dispute this.

Mr Jonathan Wong, instructed by Messrs Li & Partners, for the Plaintiff

Mr Jim Jamison of Messrs Clifford Chance, for the Defendant