BEACON COLLEGE LTD. v. YIU MAN HAU, ALFRED AND OTHERS

HCA2529/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2529 OF 2001

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(Heard together)

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REASONS FOR DECISION

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1. There are before the court two inter partes summonses taken out by the plaintiff in the respective actions for interlocutory injunctions against the defendants. The hearing does not concern the 6th defendant in HCA 2529/2001 as a result of certain undertakings previously given by it. Before the hearing, the 6th defendant in HCA 2532/2001 also offered similar undertakings and they were accepted by the plaintiff. The hearing therefore only concerns the 1st to 5th defendants in both actions. For ease of reference, I shall in this Reasons for Decision refer to the 1st to 5th defendants as "the defendants".

2. Previously on 15 June 2001, this court had granted interim injunctions in both actions restraining the defendants, until after the determination of the plaintiff's inter partes summonses, from undertaking business and activity that compete with the business of the plaintiff and from soliciting or enticing the plaintiff's students away from the plaintiff. The injunctions sought in the inter partes summons are wider in scope. At the hearing, leading counsel for the plaintiff indicated that the plaintiff is contented for the interim injunctions to be continued until the trial of the actions or further order of the court.

3. At the conclusion of the hearing, I granted an order continuing the interim injunctions until the trial of the actions or further order of the court upon certain undertakings given by the plaintiff and gave oral reasons for so doing. I now reduce the reasons into writing.

Background

4. The background of the two actions and the nature of the claims have been set out in my Reasons for Decision handed down on 26 June 2001. A summary of the parties' case has also been set out therein. I will not repeat them here. I shall, however, correct one factual error that appears in paragraph 8 of that Reasons for Decision. While all the Day School Contracts of the 1st, 2nd, 4th and 5th defendants contain provisions for early termination by the giving of written notice, the notice period prescribed in these contracts differs. In respect of the 1st, 2nd and 4th defendants' contracts, the length of notice required is one month. In the case of the 5th defendant, it is six months.

The issue

5. At the commencement of this hearing, leading counsel for the defendants indicated that, for the purposes of the present applications, the defendants were prepared to proceed on the premises that their Evening School Contracts have not been terminated and remain extant. That being the case, it will not be necessary to consider the restrictive covenant in the Evening School Contracts.

6. Also on that basis, the defendants, through their leading counsel, offered the following undertakings in lieu of injunctions, to last until the trial of the actions or further order of the court:

(1) Not to do or suffer anything which may adversely affect the reputation of the plaintiff,

(2) Not to circulate, transfer, provide, disclose, divulge, publish, disseminate to any other without the express consent of the plaintiff or otherwise mis-use information or materials whether printed or otherwise relating to the administrative operational or teaching system of the plaintiff, or other information of the plaintiff which may be of use to other schools or education establishments,

(3) Not to solicit or entice away from or endeavour to solicit or entice away from the plaintiff any students of the plaintiff who have enrolled with the plaintiff,

(4) Not to engage in or in connection with, either directly or indirectly through his agent, employee, consultant and manager or on behalf of any person, firm or company, any business or activity similar to or in competition with that carried on by the plaintiff in Yuen Long, Tuen Mun, Sheungshui, Yaumatei, Tinshuiwai

("the Defendants' Proposed Undertakings).

7. The Defendants' Proposed Undertakings are substantially the same as the interim injunctions save that paragraph (4) is restricted to the districts set out therein whereas the interim injunctions contain no geographical restrictions. The geographical restrictions resemble those contained in the restrictive covenants under the Day School Contracts and Evening School Contracts, save two differences. The first is that Mongkok district has been omitted. Secondly, instead of adopting "northwestern New Territories" as prescribed in the restrictive covenants, paragraph (4) of the Defendants' Proposed Undertaking refers to "Tinshuiwai".

8. The defendants' position is that the districts in paragraph (4) are those in which the plaintiff's schools are situated. As for northwesten New Territories, the explanation is that the description is too vague and it is therefore preferable to confine to Tinshuiwai, which they say, is the largest settlement within that district. The Defendants' Proposed Undertakings are not accepted by the plaintiff. The geographical restrictions is the point where the parties part.

9. Leading counsel for the defendants further indicated that, for the present applications, no issue is taken on whether the plaintiff has established on the merits of the case a serious question to be tried or a real prospect of success. The only issue on these applications is whether it is just and equitable to continue the interim injunctions until after the trial of the actions.

The arguments

10. For the plaintiff, the argument is that the injunctions sought are merely to enforce a negative covenant in the Evening School Contracts, which the defendants have accepted to be extant for the purposes of the present applications. The negative covenant reads:

"The Teacher further covenants with the Company that he/she shall not in the duration of this Agreement:-

(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 course(s) to students whether on his/her own behalf or on behalf of any person, firm or company directly or indirectly;

(ii) solicit or entice away from or endeavor to solicit or entice away from the Company or the College any students of the Company or the College who have enrolled with the Company; and

(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 activity or business in competition with the business of the Company."

("the Negative Covenant"). This is contained in clause 8(c) of the Evening School Contracts of the 1st, 3rd to 5th defendants and clause 9(c) in the Evening School Contract of the 2nd defendant.

11. The plaintiff accepts that the defendants cannot in law be compelled to teach for the plaintiff and it is not seeking to do so through the injunctions, although it is prepared to take them back should the defendants so wish. The plaintiff justifies the injunctions on the basis that it has substantial interest in these teachers whom it had invested and promoted heavily in the past years. Territory-wide injunctions are called for having regard to the fact that the plaintiff's advertising programme and reputation are territory-wide.

12. For the defendants, it is argued that the territory-wide injunctions sought have the effect of compelling them to either remain idle or to perform the positive covenants in their contracts with the plaintiff. This together with the fact that the plaintiff is in law not entitled to a decree of specific performance on the contracts render it unjust and inequitable to enforce the Negative Covenant by way of the injunctions sought.

The law

13. A number of authorities have been referred to by counsel on both sides in their oral and skeleton submissions. There is however no disagreement between them on the law. It is therefore only necessary to summarize the effects of these cases.

14. The general rule is that contract for personal services cannot be enforced by decree of specific performance. It follows that an employee cannot be compelled by an injunction to perform the positive covenant to work in his contract: Whitwood Chemical Co. v. Hardman [1891] 2 Ch. 416. But where the contract contains a negative covenant against the employee working for anyone other than the employer, the covenant may be enforced by an injunction. In the well known case of Lumley v. Wagner [1852] 1 De G.M. & G. 604, an injunction was granted to enjoin the defendant, a famous opera singer, from singing for other theatres during the term of the contract. Lord St. Leonards L.C., while recognising that the court has no power to compel the defendant to sing for the plaintiff, considered that an injunction should be granted in that the court has power to "compel her to abstain from the commission of an act which she has bound herself not to do": at p. 619.

15. The law, therefore, draws a distinction between being forced to work and being forced not to work. The distinction, however, will not apply where the effect of the injunction is to "drive the defendant either to starvation or to specific performance of the positive covenants" : Warner Brothers Pictures Inc. v. Nelson [1937] 1 KB 209, 216.

16. Conversely, an injunction will be granted where the employee has some other reasonable means of earning a living. The case of Warner Brothers Pictures Inc. v. Nelson, may be regarded as an example of this proposition. There, a famous movie actress was restrained from performing for other move studio in breach of her contractual obligation to perform only for the plaintiff. The injunction was explained on the basis that as the actress was "a person of intelligence, capacity and means" and would be "able to employ herself both usefully and remuneratively in other spheres of activity, though not as remuneratively as her special line. She will not be driven, although she may be tempted, to perform the contract" : at p.219. The court considered that such temptation is no objection to the grant of an injunction.

17. In as much as a defendant cannot be forced by an injunction to choose between poverty and working for the plaintiff, no injunction will be granted where the practical result is to grant specific performance by presenting the defendant with the choice between remaining idle or unemployed and working for the plaintiff : Page One Records Ltd v. Britton [1968] 1 WLR 157, Warren v. Mendy [1989] 1 WLR 853.

18. In Warren v. Mendy, Nourse LJ stated the test of whether a defendant would be compelled to perform his positive obligations to be as follows (at p.867):

"... Compulsion is a question to be decided on the facts of each case, with a realistic regard for the probable reaction of an injunction on the psychological and material, and sometimes the physical, need of the servant to maintain the skill and talent. The longer the term for which an injunction is sought, the more readily will compulsion be inferred. Compulsion may be inferred where the injunction is sought not against the servant but against a third party if either the third party is the only other available master or if it is likely that the master will seek relief against anyone who attempts to replace him."

Reasons for decision

19. With these legal principles in mind, I turn now to deal with the facts of the present actions. The first matter that has to be decided is whether the interlocutory injunctions tantamount to a specific performance of the defendants' Evening School Contracts. The issue here is whether the defendants are left with choices between poverty or idleness and working for the plaintiff. That, in turn, depends on whether they are left with any reasonable alternative of employment or work.

20. The plaintiff suggests that the defendants can in the interim period teach at government or government aided schools, primary schools or tertiary education institutions to which the plaintiff will have no objection. What the defendants will be enjoined from doing, under the terms of the interim injunction, if continued, is to teach in private and tutorial schools whose business and activity compete with those of the plaintiff.

21. For my part, I do not consider teaching in primary schools or tertiary education institutions viable or realistic options open to the defendants. It does not require much analysis for one to appreciate the differences in training and qualification, to say the least, required for teaching primary, secondary and tertiary education institutions. The evidence filed does not show that these teachers had experience teaching in primary and tertiary education institutions or training that will enable them to be regarded suitable or capable for the work.

22. As to teaching in government or government aided secondary schools, I am of the view that this is a realistic alternative for the defendants. In coming to this view, I am conscious and fully aware that the teaching and learning environment of these, what may be described as, more conventional schools is rather different from that in private, especially tutorial schools. Tutorial schools are essentially examination oriented and the emphasis of the teachers is largely, if not entirely, on preparing the students for the various public examinations. Given the differences, I am prepared to accept that there will be differences in the approaches and skills required of the teachers, although such differences must not be overstressed. Having said that, I note that it has not been suggested by the defendants in their affirmations or through leading counsel's submissions that they do not possess the ability to teach in government or government aided schools. All of them are university graduates. The 1st and 3rd defendants are registered teachers whereas the other three defendants are permitted teachers. Before joining the plaintiff, they all had experience teaching in day schools. For the 1st and 4th defendants, they had even attained the position of senior graduate master. There is no question of the defendant teachers lacking the qualification or necessary skill to be teachers in day schools albeit operated or subsidized by the government.

23. Leading counsel for the defendants submits that vacancies in government or government aided schools will have been filled by this time of the year. The 1st defendant also stated in his affirmation that it is unlikely for anyone to succeed in securing such employment after July. In response to this, the plaintiff placed before the court a Chinese newspaper issued on 20 July 2001 in which there are various advertisements on teaching vacancies in government aided secondary schools. It is, therefore, not impossible for the defendants to find teaching opportunities in government or government subsidized schools at this time of the year. If necessary, I am prepared to take judicial notice that opportunities for working as supply teachers can arise after July.

24. Faced with the newspaper advertisements, the defendants, through leading counsel, responded that government and government aided schools would not take on tutorial teachers, partly because they are too commercial, hence incompatible with the school environment, and partly because they present an embarrassment to these schools. This is so since students go to tutorial schools because they regard the preparations and trainings offered by conventional day schools insufficient to prepare them for the public examinations.

25. As leading counsel for the plaintiff rightly observed, this had hitherto not been part of the defendants' case. Neither had they deposed to this in their affirmations. Their case had always been that teaching vacancies in government and government aided schools had all been filled up and there is no realistic prospect of securing employment now. Quite apart from this and quite apart from the criticisms that they should have included such factual assertions in their opposing affirmations, the fact is the defendants all had experience teaching in days schools. One would have thought that this, together with their special expertise in coaching students for public examination, will present them as suitable, if not attractive, applicants for the teaching vacancies in government or government aided schools. It may be that they have to undergo some adjustments in their teaching style or approaches, but that is far from saying that they stand no reasonable opportunity of securing employments in these schools or that teaching in these schools is not a viable or realistic option.

26. It may be that the defendants are reluctant to adapt to the teaching and learning environment of the conventional day schools. It may also be that teaching in government or government aided schools is, therefore, less attractive and/or also less remunerative than teaching tutorials, so that returning to teach for the plaintiff is a more attractive option. That, however, is not the same as, and certainly falls short of, compelling the defendant teachers to resume teaching for the plaintiff. As observed by Nourse LJ in Warren v. Mendy, the question of compulsion involves a realistic analysis of the facts of each case. As the foregoing analysis shows, teaching in government or government aided schools is a reasonable alternative open to the defendants. They will be able to continue their teaching career, utilize their expertise and practise their skill. There will be a reasonable income, albeit less profitable than teaching tutorials. I do not agree that the defendant teachers will be driven to poverty or made to become idle so much so that they will be compelled to return to the plaintiff, if the interim injunctions are continued.

27. I will, in addition, observe that not much weight can be placed on the point that the alternative is less remunerative or attractive, given the assumption that the Evening School Contracts are extant whereupon the defendants are obliged to teach for the plaintiff only. It is their own conscious decision not to teach for the plaintiff, and if the contracts are extant, they cannot have cause to complain about earning less.

28. In short, the interim injunctions, if continued, will not left the defendant teachers with no reasonable or realistic option but to return to teach for the plaintiff. The second matter is whether the court should exercise its power to grant the injunctions. The issue here is whether it is oppressive so that it is unjust and inequitable to continue the interim injunctions.

29. I have indicated that there is other reasonable means of earning a living available to the defendants. In so saying, I do not rule out the possibility that the defendants may in the end consider teaching for the plaintiff a more attractive alternative and wish to return to the plaintiff. Leading counsel for the defendants argue strongly that the purpose of the interlocutory injunctions is to drive the defendants into returning to the plaintiff so that the plaintiff can lock them in and see to it that their career as tutorial teachers ceases to develop and flourish. The defendants' fear is that if they were compelled to return to the plaintiff, they will be at the mercy of the plaintiff in terms of such teaching arrangement as allocation of time slots for the classes, enrolment listings and so on. These matters will, in turn, affect the income of the defendants in that under the Evening School Contracts, they are remunerated by a certain percentage of the fees paid by the students was enroll with their classes. It is said that the mutual trust and confidence between the parties have clearly gone, the continuation of the interim injunctions will work injustice. In leading counsel's words, the result is that the defendants will "wither" or "perish" under the plaintiff's regime.

30. To address this aspect of the opposition, the plaintiff, through leading counsel, offered the following undertakings :

(1) the defendants will be given the same classes and same schedule as they had been given for the past year;

(2) the plaintiff will not cancel any class to be taught by the defendants; and

(3) the plaintiff will, within 14 days after the end of every four lessons in each course, pay the defendants their fees due to them from the tutorials or advance to the defendants amounts not less than fees due to them from such tutorials and for adjustment to be made thereafter.

("the Plaintiff's Proposed Undertakings")

31. The Plaintiff's Proposed Undertakings present a balance between the defendants' interest to work as tutorial teachers so as to maintain their skill and reputation in the field and the prejudice likely to be suffered by the plaintiff in allowing the defendants to teach tutorials for rival schools. It aligns the defendants' fear of being at the plaintiff's mercy and of being locked in and made to perish.

32. The Plaintiff's Proposed Undertakings therefore take the present applications outside the cases of Page One Records Inc. v. Nelson and Warren v. Mendy. The plaintiff does not accept that the relationship between the parties involves mutual trust and confidence. But assuming that it does, the Plaintiff's Proposed Undertakings will ensure that the defendants will not be worse off if they choose eventually to resume teaching for the plaintiff. Their position and teaching arrangement will not be different from those in the past year.

33. The defendants however say that the Plaintiff's Proposed Undertaking is insufficient to preserve their position in the interim period in that they will not be promoted by the plaintiff at all or in the same degree or manner as previously. It may well be the case that the plaintiff will refrain from promoting the defendants as vigorously as before or at all, given the institution of these proceedings and the uncertainty surrounding the parties' relationship. But that should not be a significant factor in considering whether to continue the interim injunctions. This is because on the defendants' own case, the promotion efforts and the advertising programme of the plaintiff are not the principal reasons for their success as tutorial teachers. In their affirmations, they are at pain to point out that it is their skill and expertise and the examination results achieved by their students that matter, and that their reputation is built upon words of mouth. What they impliedly say is that the plaintiff only provides them with an opportunity to teach. That being the case, whether the plaintiff will advertise and promote them in future will not affect the development or maintenance of their career and reputation as tutorial teachers, so long as the opportunity to teach remains.

34. Afterall, it cannot be overlooked that under the Evening School Contracts, the plaintiff has made no promise or guarantee as to the amount of promotion to be put on the defendants, nor has the plaintiff made any guarantee as to the privileges or priorities in terms of teaching arrangement and rankings that the defendants may enjoy. Still less has there been any assurance as to the level of income that the defendants may get from teaching tutorials for the plaintiff. The perceived risks or fear of being badly treated by the plaintiff has always been there, with or without these proceedings. There is no reason why the defendants' position should be improved by the present applications.

35. Leading counsel for the defendants also submits that it is unlikely that the court will grant permanent injunctions to enforce the Negative Covenant because of the duration of the Evening School Contracts and because the defendants will in effect be compelled to perform the positive obligations. It is said that interlocutory injunctions to enforce the Negative Covenant ought not, in the circumstances, be granted. The prospect of the grant of a permanent injunction is a relevant consideration at the interlocutory stage, but it does not follow that an interlocutory injunction cannot be granted where the prospect of a permanent injunction is not strong : Evans Marshall & Co. Ltd v. Bertola [1973] 1 WLR 350. In the present case, I agree with leading counsel for the plaintiff that it is important to preserve the status quo ante bellum. The status quo will probably be lost if the defendants are relieved from the Negative Covenant.

36. A final matter that I need to deal with, albeit briefly, is whether the plaintiff has a legitimate interest in seeking territory-wide injunctions. As a result of the form and extent of the plaintiff's advertising programme, which includes television coverage, prima facie the plaintiff enjoys a territory-wide reputation. While the defendants may be right to doubt whether a student living in Shaukeiwan will attend the plaintiff's tutorial school in Yuen Long, it is not fanciful for a student living in the Hong Kong Island be attracted by the plaintiff's advertisement to travel to the plaintiff's branch school in Yaumatei. There is, in my view, justification for territory-wide injunctions.

37. For the reasons aforesaid, I consider that the interim injunction granted on 15 June 2001 should be continued until the trial of the actions herein or further order of the court.

Directions for Speedy Trial

38. Both sides consider that the actions should be expedited. I agree. Counsel agree that the legal representatives should endeavour to agree on the necessary directions. In view of the fact that the views of the 6th defendant in HCA2529/01 and the 6th defendant in HCA2532/01, who are not present at this hearing, will have to be sought, it is better for the parties in the first place to discuss and agree among themselves an appropriate timetable. Accordingly, I direct that the parties do within seven days from the making of the order lodge with the court a list of agreed proposed directions, including an estimate of the length of the trial. I will add that, failing agreement, the parties should submit their own lists of proposed directions. The matter can then be dealt with by correspondence so as to dispense with further court attendance on this. The progress and the observance of the directions ultimately to be made will have to be checked and monitored by check-list review or pre-trial review to be heard by either the listing master or judge or, if necessary, before myself.

Costs

39. The plaintiff asks that the costs of the applications for interim injunction be in the cause, to which the 1st to 5th defendants do not object. The plaintiff further asks for the costs of the inter partes applications to be to the plaintiff in any event. The defendants oppose this. The general rule has been for the plaintiff's costs to be in the cause where a plaintiff succeeds in obtaining the interlocutory injunction : Hong Kong Civil Procedure 2001, para.29/1/48. There are no special features present in these applications justifying a departure from the general rule. It is also to be noted that the Plaintiff's Proposed Undertakings, which is one of the important factors considered by this court, were only offered in the course of the plaintiff's submission in reply. In addition, it is only at this hearing that the plaintiff confines its inter partes applications to the continuation of the interim injunctions. The defendants' resistance to the inter partes applications is therefore by no means unreasonable. There is thus no justification for awarding costs against the defendants in any event.

Conclusion

40. The orders that I make are as follows :

(1) Upon the Plaintiff's Proposed Undertakings and upon the plaintiff's usual undertaking as to damages, the interim injunctions granted in both actions on 15 June 2001 be continued until after the trial of the actions or until further order of the court.

(2) The costs of the applications for interim injunctions be costs in the cause of the respective actions.

(3) The costs of the inter partes applications be the plaintiff's costs in the cause of the respective actions.

(4) The parties to lodge with this court within seven days from 23 July 2001 an agreed list of proposed directions for expedited trial. Failing agreement, the parties to submit to this court their own proposed directions.

Representation:

Sir John Swaine, SC & Miss Priscilla Wong, instructed by Messrs Anthony Chiang & Partners, for the Plaintiff in both actions.

Mr Alan Leong, SC & Mr Bernard Mak, instructed by Messrs Li & Partners, for the 1st to 5th Defendants in both actions.

HCA2529/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2529 OF 2001

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(Heard together)

Coram: Hon Chu J in Chambers

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REASONS FOR DECISION

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1. On 11 June 2001 the plaintiff in both actions took out inter partes summonses for interlocutory injunctions against the defendants. The summonses were returned on 15 June 2001 when, apart from the 6th defendant in HCA2529/2001 ("Man Sheung"), all the defendants indicated that they required time to file evidence to contest the applications. The plaintiff then proceeded to apply ex parte on notice for interim injunctions pending the determination of the summonses. As for Man Sheung, it has offered to give certain undertakings which were accepted by the plaintiff. The interim applications therefore do not concern it. Since the matters involved in the applications in both actions overlap substantially, they were heard together. At the conclusion of the hearing, I granted the interim injunctions sought. My reasons appear below.

Background

2. The plaintiff in both actions is a private school which was first set up in 1989 in Yuen Long. Apart from the main school in Yuen Long, it now has five branch schools in Yuen Long, Sheung Shui, Tuen Mun and Mongkok. It operates both a day school ("the Day School") and evening and tutorial classes ("the Evening School"). For the current year, it has a student population of approximately 1,600 for the Day School and the enrolment for the Evening School is about 17,000. It employs about 60 full-time teachers.

3. The plaintiff's case is that it enjoys substantial reputation as a private school and is well-known to students and parents in areas where it operates. Its unaudited gross income for the year ending 31 July 2000 was in the region of $50 million. The reputation is partly built upon the past examination results of its students and partly upon the substantial and wide-ranging promotion and advertisements it has put up throughout the years, especially since 1999. The expenditure on advertisement for the period between June 2000 and April 2001 came up to $6 million.

4. According to the plaintiff, it has developed a policy of promoting a core group of select teachers known as "Star Alliance". Teachers who are regarded as the most outstanding teacher in a particular subject or field will be chosen to become members of the Star Alliance and will be singled out for continuous and extensive promotion and advertisement. In view of the very substantial promotion and advertisement costs, and to ensure that it will not be deprived of the fruit of its investment on these select teachers, the plaintiff had required some of these teachers to enter into 5-year contracts with it.

5. The plaintiff's teachers are paid a basic salary for teaching in the Day School and a fee for teaching in the Evening School which represents a certain percentage of the gross school fees received from the students who enroll with their classes. The plaintiff says that because of its large scale promotion and advertisements, its teachers, especially those of the Star Alliance, become very popular and their income is in general several times higher than what they would earn as teachers of government or government subsidized schools.

6. The 1st to 5th defendants in both actions are the teachers of the plaintiff. The 1st and 4th defendants joined in September 1997, the 2nd defendant in September 1999, the 3rd defendant in September 1998 and the 5th defendant in September 1992. Except the 2nd defendant, all of them belong to the Star Alliance.

7. Save the 3rd defendant, the 1st, 2nd, 4th and 5th defendants have signed written contracts with the plaintiff in respect of their teaching in the Day School ("the Day School Contract"). Further, all five defendants had entered into written contracts with the plaintiff for their teaching in the Evening School ("the Evening School Contract"). With the exceptions of the 2nd defendant's Day School Contract and the 3rd defendant's Evening School Contract, all the written contracts are for a term of five years. The duration of the defendants' contract with the plaintiff can be summarised as follows :

	Day School Contract	Evening School Contract
1st defendant	1/9/1999 - 31/8/2004	1/9/1999 - 31/8/2004
2nd defendant	1/8/2000 - 31/7/2001	1/9/2000 - 31/8/2005
3rd defendant	no written contract	16/7/2000 - 15/7/2004
4th defendant	1/9/1999 - 31/8/2004	1/9/1999 - 31/8/2004
5th defendant	1/9/1998 - 31/8/2003	31/8/1999 - 31/8/2004

8. All the Day School Contracts contain provisions for early termination by either party giving at least one month written notice or paying one month's salary in lieu thereof : clause 6(a). There is, however, in the Evening School Contract, no provision for early termination other than termination by the plaintiff for cause. The only exception is that of the 3rd defendant, of which clause 8(e) enables him to give 6-month notice for termination in the event he is going to work in fields other than education.

9. Clause 3 of the Day School Contract governs the duties and conducts of the teachers. For the present application, clause 3(d) is relevant and it reads :

"The Teacher shall devote the whole of his/her energies, time and best endeavours and abilities to the performance of his/her duties and in all matters act diligently, loyally, honestly and faithfully to the College and shall not directly or indirectly engage in or be concerned with any other activities or business (including in particular any private tuition)."

10. Similarly, clauses 3 and 4 of the Evening School Contract set out the scope of services and the duties of the teachers. In particular, clause 4(i) provides that a teacher shall at all times "devote the whole of his/her energies, time and endeavours and abilities to the performance of his/her duties and obligations herein throughout the duration" of the Contract. Clause 8(c) further provides that during the occurrence of the Contract, a teacher shall not :

"(i) be [engaged] 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 course(s) to students whether on his/her own behalf or on behalf of any person, firm or company directly or indirectly.

(ii) solicit or entice away from or endeavor to solicit or entice away from the Company or the College any students of the Company or the College who have enrolled with the Company; and

(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 activity or business in competition with the business of the Company."

11. In addition, both the Day School and Evening School Contracts contain restrictive covenants. In the case of the Day School Contract, clause 7(b) provides that :

"... a teacher shall not, upon the expiry or otherwise termination of the Contract for Day School, be engaged in or in connection with, either directly or indirectly through his agent, employee, consultant and manager or on behalf of any person, firm or company, any business or activity similar to or in competition with that carried on by the Plaintiff within one year from such expiry or otherwise termination in Hong Kong."

The areas restricted vary from one contract to another and the position can be summarised as follows :

1st defendant	Yuen Long, Tuen Mun, north western New Territories
2nd defendant	Yuen Long, Tuen Mun, north western New Territories, Mongkok, Yaumatei
4th defendant	Yuen Long, Tuen Mun, north western New Territories
5th defendant	No geographical restriction

12. As for the Evening School Contract, clause 8(d) provides as follows :

"The Teacher hereby covenants that he shall not, upon the expiry or otherwise termination of this Agreement, be engaged in or in connection with, either directly or indirectly through his agent, employee, consultant and manager or on behalf of any person, firm or company, any business or activity similar to or in competition with that carried on by the College within one (1) year from such expiry or otherwise termination in Sheung Shui, Mongkok, Yaumatei, Yuen Long and Tuen Mun and generally within the north western part of the New Territories."

13. Clause 8(d) of the 1st defendant's Evening School Contract is, however, different from that of the others. It allows the 1st defendant, with the plaintiff's approval, to teach at the Hong Kong Island branch of the 6th defendant in HCA2532/2001 ("Excel") provided that the plaintiff does not establish any branch school in Hong Kong Island.

14. Similar exemption has been granted to the 3rd defendant in clause 8(f) of his Evening School Contract to enable him, with the plaintiff's approval, to teach at the Shatin and Causeway Bay branches of one "A in A Learning Centre" for one week day in each week.

15. Excel is also a private school with various branches. One of its branches is located opposite to the plaintiff's Mongkok branch school. The plaintiff's mega advertisement for its Mongkok branch school, featuring the 1st, 3rd to 5th defendants, is situated on this building.

The actions

16. The plaintiff's case is that since a few months ago, the 1st to 5th defendants have exhibited a change in their attitude towards the plaintiff and in the discharge of their duties. Since early May, there were rumours among the students that they would leave the plaintiff's employment. On 11 May 2001, the 4th defendant, on behalf of the defendant teachers, informed Mr Wister Chan, the Chief Principal of the plaintiff, that they wished to resign and asked to be released from their contracts and employment. Mr Chan indicated that he had to consult the management authority of the plaintiff. The defendant teachers agreed not to disclose their intention to resign to the students or other teachers or any outsiders before their resignations were accepted. Then on 14 May 2001, the 1st to 5th defendants each submitted a letter dated 11 May 2001 giving notice of resignation from all posts effective from 1 June 2001 ("the Resignation Letter"). The plaintiff did not accept the resignations and returned all the Resignation Letters to the defendant teachers. The Resignation Letters were later re-sent to the plaintiff by registered mail. Subsequently, the defendant teachers orally informed the plaintiff that they would continue teaching the Day School until the end of the school term.

17. In the meantime, the 1st to 5th defendants had made known their resignations, both to their students and colleagues. This had given rise to concerns among the students. On about 21 May 2001, it was posted on the website owned by the defendant teachers that the 1st to 5th defendants would cease teaching tutorial classes at the plaintiff's schools. Subsequently, the defendant teachers also indicated publicly that they would be joining other schools, including Man Sheung and Excel. From the material disclosed by Man Sheung, it can be seen that they had contracted with Man Sheung to commence part-time teaching on 1 June 2001. The contracts were dated 21 May 2001. Excel has also stated in their promotion pamphlets that the defendant teachers would be teaching in its schools after 18 July 2001.

18. On 24 May 2001, the plaintiff's solicitors wrote to the 1st to 5th defendants pointing out that their resignations were not accepted by the plaintiff and demanded them to cease their wrongful activities. The defendant teachers' solicitors replied by letter dated 26 May 2001 denying any breach of duties and stated that their employment or contracts with the plaintiff had been "terminated by sufficient notice".

19. The plaintiff's solicitors had also issued to a number of private schools, including Excel and Man Sheung, letters dated 24 May 2001 informing them that there were subsisting employment and contracts between the 1st to 5th defendants and the plaintiff. It also pointed out that the defendant teachers' attempt to canvass employment with other schools constitute breaches on their part and that any procurement or participation in their breaches may attract civil liabilities.

20. Excel did not respond to this letter. The plaintiff's solicitors issued a second letter dated 2 June 2001 to Excel requesting it to confirm whether any of the defendant teachers had joined or would be teaching at its schools. There was also no reply from Excel.

21. On 5 June 2001, the plaintiff issued the Writ in both actions. The reliefs sought in the Indorsements of Claim in both actions are similar. Apart from damages, a number of injunctive relief is sought. In particular, the plaintiff seeks injunctions to restrain the 1st to 5th defendants from acting in breach of their employment contracts and their duties to the plaintiff. The plaintiff also seeks injunction to restrain Excel and Man Sheung from procuring the defendant teachers to act in breach of their contracts with the plaintiff and from unlawfully interfering with the business of the plaintiff. In addition, the plaintiff seeks injunction to restrain all defendants from conspiring to injure the plaintiff's business. Then on 11 June 2001, the plaintiff took out the inter partes summonses for interlocutory injunctions.

The application

22. The scope of the interim injunction sought by the plaintiff is fairly restricted. As against the 1st to 5th defendants, it seeks to restrain them from undertaking business and activity that compete with the business of the plaintiff and from soliciting or enticing the plaintiff's students away from the plaintiff. In the case of Excel, the injunction sought is to restrain it from procuring the 1st to 5th defendants to act in breach of their contracts with the plaintiff.

23. The plaintiff's case is that the contracts and employment of the 1st to 5th defendants have not been terminated so that they are bound by the obligations and duties provided thereunder. As a fall back position, the plaintiff argues that the defendant teachers are bound by the restrictive covenants in their contracts with the plaintiff so that, even if their contracts have been terminated, they are not at liberty to teach in other schools.

24. It is also the plaintiff's position that the activities and breaches of the defendants will cause irreparable damages to it in that the plaintiff will suffer setback in its business and loss in terms of its goodwill, both of which cannot be adequately compensated in monetary terms. In this regard, the plaintiff relies, among other things, on the fact that Excel's Mongkok school is located opposite to its Mongkok branch school and the plaintiff's mega advertisement featuring four of the defendant teachers is placed on the building housing Excel's Mongkok school. The plaintiff also says that the defendants' financial ability to pay any damages eventually ordered is in doubt.

25. As to urgency, the plaintiff points to the fact that this is the time when private schools are actively promoting and advertising themselves to attract enrolment and that the students, once enrolled, are expected to remain with the same school for the school year. There is also the fact that tutorial classes of the plaintiff and of Excel will commence after mid-July.

26. The 1st to 5th defendants' case, as related by leading counsel, is that on 9 May 2001, the 4th defendant on behalf of the defendant teachers had reached an oral agreement with Mr Wister Chan that the 1st to 5th defendants would be released from their contracts and employment on the understanding that the defendant teachers would oversee the completion of the current term of the Day School, which will expire on 31 July 2001 and that of the Evening School, which expired on 31 May 2001.

27. Alternatively, the 1st to 5th defendants say that the plaintiff had committed repudiatory breach of the contracts and employment, which the defendants are entitled to accept and thereby terminate the contracts and employment.

28. As to the restrictive covenants, the defendants argue that they are unenforceable for being unreasonable.

29. The 1st to 5th defendants also argue that the balance of convenience lies in their favour in that any loss to the plaintiff can be quantified whereas they will be deprived of their livelihood if the interim injunction is granted.

30. For Excel, it is argued that the Indorsement of Claim is defective and that the evidence does not disclose any cause of action against it. Alternatively, it is said that the evidence does not reveal any activity of Excel which is unlawful and justifies or requires the imposition of an injunction.

The Indorsement of Claim

31. It is convenient to begin with Excel's argument on the validity of the Indorsement of Claim in HCA2532/2001. I accept that paragraph (2) thereof, in seeking an injunction to restrain, not only the 1st to 5th defendants, but also Excel from acting in breach of duties owed to the plaintiff, possibly contains an error. The error is however capable of being amended and cured. Other than this, I am unable to agree with the argument that the Indorsement is defective. Order 6, rule 2(1)(a) of the Rules of the High Court provides that an Indorsement of Claim shall give "a concise statement of the nature of the claim or the relief or remedy required in the action". The Indorsement in HCA2532/2001 has pleaded the causes of action and reliefs sought against the defendants. It has complied with the Rules and is not irregular.

32. There is also no merit in the complaint that the Indorsement lacks particulars so that the defendants, in particular Excel, is not informed of the basis of the claim against them. The Indorsement is to be followed by a Statement of Claim in which full particulars of the claim are to be set out. For the interlocutory injunction application, the plaintiff's affidavits have supplied the basis of the claim and the facts relied upon. There is no question of Excel not knowing what case to meet.

33. In any event, the alleged shortcomings of the Indorsement is capable of being cured by the Statement of Claim to be served : Hong Kong Civil Procedure 2001, para.6/2/2 at p.54. The submission that the plaintiff must start again, meaning to commence a fresh set of proceedings, must fail.

Serious question to be tried

34. I deal firstly with the claim against the 1st to 5th defendants. Under the Day School Contract, one month's written notice or one month salary in lieu of notice is required to terminate the contracts. On the plaintiff's evidence, the Resignation Letters, being served less than one month from the proposed effective date of 1 June 2001, do not constitute sufficient notice. In the case of the 3rd defendant who had not signed the Day School Contract, section 5 of the Employment Ordinance, Cap.57 deems his contract with the plaintiff to be a contract renewable from month to month. Section 6(2)(a) provides that the length of notice required to terminate the contract to be not less than one month. His Resignation Letter therefore does not constitute sufficient notice. A similar conclusion will be reached under the common law where reasonable notice is required to terminate a contract of employment and for a monthly contract, one month is arguably a reasonable period.

35. On the Evening School Contracts, they are for a fixed term of five years in the case of the 1st, 2nd, 4th and 5th defendants and of four years in the case of the 3rd defendant. Considering the plaintiff's evidence and, in particular, the fact that they, unlike the Day School Contract, contain no provision for early termination, I accept that it is probable that the parties had intended that the Evening School Contract could not be unilaterally terminated before their expiry dates by the giving of reasonable notice: see Gillian v. AHK Air Hong Kong Ltd [1989] HKC 189 at 198E-H.

36. I turn now to look at the defendants' case. While I appreciate that the 1st to 5th defendants have yet to file their evidence, I feel obliged to point out that their assertion of an oral agreement of release does not sit comfortably with their solicitors' letter dated 26 May 2001, which makes no reference to such an agreement. It is also strange that after the alleged release agreement, they would issue the Resignation Letters, which again make no reference to the alleged agreement.

37. Even accepting the case of the 1st to 5th defendants as put forward by their leading counsel, it is plain that their Day School Contracts and the 3rd defendant's employment for the Day School would only come to an end on 31 July 2001. Until then, their employments and the Day School Contracts remain valid and binding on them. Pursuant to clause 3(d) of their Day School Contracts, the 1st, 2nd, 4th and 5th defendants are obliged to devote their full time and energies to the discharge of their duties to the plaintiff. They are also required to act loyally and faithfully to the plaintiff and not to engage in any other activities or business. As for the 3rd defendant, it is trite that under the common law, being an employee, he is under an implied duty of fidelity and good faith to the plaintiff. The law further implies into his employment a duty not to engage in activities and business that compete with the plaintiff. The 3rd defendant's contractual obligations in this regard therefore do not differ materially from those of the other defendant teachers despite that he had not signed the Day School Contract.

38. By entering into contracts of employment/service with Man Sheung in May 2001 at a time when, on their own case, both their Day and Evening School Contracts and employments were subsisting, the 1st to 5th defendants had acted in breach of their obligations under their contracts and employments with the plaintiff. On the basis of the affirmation of David Lee filed on behalf of Excel and having regard to Excel's promotional leaflets, the inference is that the defendant teachers had agreed to teach at Excel's schools before their Day School Contracts and employment expire, to say the least. This can hardly be compatible with their duties under clause 3(d) or the common law.

39. The 1st to 5th defendants seek to justify this on the basis that they were released from the Evening School Contracts after 31 May 2001 and that Excel and Man Sheung only offer tutorial classes. Their argument is that despite the Day School Contracts and employment, they are free to teach tutorial classes once the Evening School Contracts come to an end. I do not accept this. Clause 3(d) of the Day School Contract, on its plain and natural meaning, does not provide for any exemption, let alone tutorial classes. To be involved or engaged in the activities and business of schools other than the plaintiff, be it day school or tutorial schools, is prima facie contrary to the duties of an employee under an employment agreement.

40. As to the 1st to 5th defendants' alternative argument that the plaintiff was in repudiatory breach of the contracts and employment, I find their case less than clear or convincing. They rely on three matters as constituting repudiation. Firstly, there was an unilateral reduction in their salaries for the Day School commencing September last year with the notice for the reduction being given in June or July. Secondly, there was repeated delay in the payment of their earnings for the Evening School. Thirdly, in the case of the 4th defendant, the plaintiff had violated his power to veto the decision to accept a competitor teacher to the Star Alliance. Again, while noting that the defendants have not yet filed their affidavits, it seems that these events did not occur recently or immediately before 9 May 2001. For instance, the unilateral reduction of salary had happened almost a year ago. It must be open to doubt whether the defendants can exercise their right to accept the alleged repudiation months after its occurrence and to rely on it as a ground for terminating the contracts and employment. At any rate, it is not altogether clear when the defendants say they accepted the repudiation and whether or how the acceptance had been communicated to the plaintiff.

41. In my view, the plaintiff has shown that there is a serious question to be tried with regard to the 1st to 5th defendants' breach of their contracts and employment and of their duties to the plaintiff. I also accept that on the evidence, especially the affirmation of Li Pun Lun, there is evidence for inferring that the defendants had attempted to entice students away from the plaintiff. It will not therefore be necessary to embark upon the issue of the enforceability of the restrictive covenant.

42. As for the case against Excel, the cause of action which the plaintiff relies on for the present application is the tort of procuring a breach of contract. Counsel for Excel argues that there is no evidence of procurement on the part of Excel and of Excel having knowledge of the 1st to 5th defendants' breach. On the second point, the two letters dated 24 May and 2 June 2001 from the plaintiff's solicitors would have put Excel on notice of the contracts and breach of the 1st to 5th defendants. To put it at the lowest, they would have alerted Excel to the distinct possibility that the 1st to 5th defendants were under contracts of employment with the plaintiff and that they would be in breach of their employment contracts with the plaintiff by canvassing and accepting alternative offers of employment. It is a case where knowledge can be inferred on the basis that a defendant has been reckless or has shut his eyes to the facts.

43. As to procurement, it has been held that in D.C. Thomson & Co. Ltd v. Deakin [1952] Ch 646 that it can take the form of direct procurement, indirect procurement or other direct intervention. The case further establishes that a defendant who, with knowledge of a contract, has dealings with the contract breaker which he knows to be inconsistent with the contract, is liable in unlawful interference. Jenkins LJ further observed at p.694 that where inconsistent dealing, which was commenced without knowledge of the contract broken, is continued after a defendant has notice of the contract, the defendant has committed an actionable interference.

44. The publication of the promotional leaflets on the classes to be taught by the 1st to 5th defendants at Excel after mid-July 2001 is prima facie evidence of dealings by Excel which are inconsistent with the defendant teachers' contracts with the plaintiff. The continued promotion of these classes after the letters of the plaintiff's solicitors dated 24 May and 2 June 2001 provides the basis for a claim in procuring the breach of contract against Excel. There is thus a serious question to be tried on this part of the plaintiff's claim against Excel.

Damages and Balance of Convenience

45. I accept that on the evidence now before the Court, it is open to the plaintiff to argue that the continuation of the 1st to 5th defendants' activities will cause not only loss in income, but also a loss of the plaintiff's goodwill which may not be quantifiable and compensatable. Even the loss in income may not be readily quantified.

46. I am also of the view that the ability of the defendants to pay any damage suffered by the plaintiff is a valid and relevant concern in deciding whether to grant interim or interlocutory relief. The plaintiff had filed evidence suggesting that some of the defendants lack the financial means while the others' means is unknown. Leading counsel for the 1st to 5th defendants and counsel for Excel did not, in the course of their submissions, seek to challenge such suggestions. It is however argued that interlocutory injunctive relief would become a rich man's charter if the financial ability of the defendants should come into consideration. This apparently attractive proposition overlooks, however, the fact that the plaintiff in the first place is required to give undertaking as to damages and may also be called upon to fortify the undertaking. Secondly, it will be futile to suggest that a plaintiff's loss and damages can be compensated in monetary terms so that interim injunction is not required when the reality is that the plaintiff will not be able to recover his damages by reason of the defendants' impecuniosity.

47. The 1st to 5th defendants also submit that they will be deprived of their livelihood if they were not allowed to teach for other schools. I acknowledge the force of leading counsel's submission that under the Evening School Contract, the defendants were paid according to the number of their students, yet there is no provision obliging the plaintiff to arrange classes for them. On the other hand, I cannot ignore the fact that the 1st to 5th defendants' Day School Contracts and employment remain subsisting so that they are not at liberty to teach in other schools. There is in addition arguably an implied term that the plaintiff is obliged to provide the defendants with work or a certain remunerative opportunity since the defendants are to be remunerated on the basis of the work to be performed and its output.

48. Considering these factors, the balance comes down in favour of the grant of an interim injunction to run until after the determination of the plaintiff's inter partes summons.

Conclusion

49. For the reasons aforesaid, I grant the interim injunctions sought against the 1st to 5th defendants and Excel upon the undertaking as to damages given by the plaintiff through its leading counsel. The costs of this application will be reserved. The inter partes summons will be adjourned to 20 July 2001 10 a.m. before the Summons Judge.

Representation:

Sir John Swaine, S.C. and Miss Priscilla Wong, instructed by Messrs Anthony Chiang & Partners, for the Plaintiff in both actions

Mr Alan Leong, S.C. and Mr Bernard Mak, instructed by Messrs Li & Partners, for the 1st to 5th Defendants in both actions

Mr T.M. Lee, instructed by Messrs Fairbairn Catley Low & Kong, for the 6th Defendant in HCA2529/2001

Mr Neal Clough, instructed by Messrs Simmons & Simmons, for the 6th Defendant in HCA2532/2001