Asia Television Ltd v Yau's Entertainment Pty Ltd

Facts 2 ATVE is a subsidiary of the first applicant, Asia Television Limited ("ATV"). For many years, ATV has operated free-to-air television in Hong Kong, including a Chinese channel which shows, inter alia, drama in Cantonese. At all material times it has had a competitor known as TVB. 3 In 1987 Mr Andy Yau, who was a former Hong Kong resident (and apparently an entertainer of some note), and by then a resident of Sydney, was approached by representatives of ATV with a view to establishing a distributor network in Australia for home videos of ATV programmes. TVB had had a network of licensees and sub-licensees in Australia for some time. The negotiations which ensued culminated in two agreements between ATV and Yau & Partners - one for Cantonese and certain Mandarin language programmes and another for Vietnamese language programmes, dated respectively 19 May 1988 and 28 July 1988. During the three-year term of those licences, sub-licences were entered into with about 20 sub-licensees throughout Australia. 4 On 16 September 1991 a new licence agreement was entered into between ATV and Yau's Entertainment, the present respondent, for a term of one year between 1 June 1991 and 31 May 1992, together with an ancillary agreement. By December 1991 Mr Yau was proposing that the next licence agreement should be for a period of three years. 5 In February 1992, Mr Tsao, who was the deputy chief executive officer of ATV and responsible for its operation to Mr Lim, the then chief executive officer, came to Australia and spent time with Mr Yau. There is conflict as to precisely what occurred during this visit, which is important, perhaps decisive, as to one aspect of the matter. I shall return to it in due course. Discussion did take place as to the new licence. 6 By April 1992 ATVE and Yau's Entertainment had agreed to the terms of a new licence agreement for a period of three years from 1 June 1992 to 31 May 1995 which were recorded in a letter. After some revision, three formal agreements were entered into - a licence agreement with ATV on 10 September 1992 and two agreements with ATVE, each made 19 October 1992, one being a licence and the other a collateral agreement in relation to the provision of master programme tapes. 7 On 20 September 1992 there was a meeting between Mr Yau and various executives of ATV in Hong Kong at which it was agreed that Yau's Entertainment could suspend a licence fee instalment due to an expected under-supply of programme hours for that year. 8 On 5 January 1995, ATVE and Yau's Entertainment agreed upon a new three-year licence for the period 1 June 1995 to 31 May 1998. This agreement was recorded in a similar letter to those which had been used to record earlier agreements, but on those occasions formal documents were ultimately executed. This was not done in relation to the 1995 licence. By this time, there were about 25 to 30 ATV stores in Australia and 45 to 50 TVB stores. 9 On 16 April 1997, ATVE and Yau's Entertainment entered into a further three-year licence agreement, for the period 1 June 1997 to 31 May 2000, with an option to renew for a further year. This is the agreement in suit. It will be observed that this licence was entered into prior to the expiration of the previous licence. This agreement is again in letter form. By this time, there were about 35 ATV stores and still about 45 to 50 TVB stores in Australia. The evidence from Mr Yau was that this agreement was entered into following approaches to him by another Hong Kong producer of Chinese dramas to act as its distributor in Australia and that he thereupon organised the new agreement with Mr Tong Ching Chuen, the then controller of ATVE. There was no evidence from Mr Tong to challenge this. 10 Mr Tong was replaced as controller of ATVE in December 1997 by Mr William Au. He was responsible for the policy-making and management of ATVE. Shortly thereafter, a cloud appeared over the relationship between ATVE and Yau's Entertainment. This concerned the dealings between ATVE and Chinatown Entertainment and its principal, Mr Wing Cheung. ATVE had the rights to programmes produced by Fee Tang Production Company Limited ("Fee Tang"), from mainland China, which were being distributed to a number of other countries. The precise relationship between ATV and Fee Tang was not fully explored in evidence, but was clearly close. Mr Au decided to distribute these programmes in Australia. By March 1998 (and probably earlier) there was an oral arrangement between ATVE and Chinatown Entertainment concerning the distribution of these programmes. Later, there were direct arrangements between Fee Tang and Chinatown Entertainment. 11 One or more of these programmes had been offered to Yau's Entertainment, but Mr Yau was not prepared to pay the asking price for them. By 3 February 1998, Mr Yau reported to Mrs Gigi Leung, an employee of ATVE, that a company had started to recruit sub-licensees, claiming to be the sole distributor of Fee Tang Productions. At that stage, Mr Yau had not received details of the Fee Tang programmes, including names, casting or expected delivery dates. In a letter of 12 August to ATVE, Mr Yau said: "Your company telephoned us early February asking whether we would like to bid for the Fee Tang drama. Because of the under supply of ATV drama, we offered A$840 for one episode and your company promised to consider. However, ten days later, you told us that it had been sold to Chinatown Entertainment (Australia) Pty Ltd." 12 By 16 March 1998, Yau's Entertainment had received letters from two licensees claiming to have been informed by Wing Cheung that Yau's Entertainment was no longer the sole ATVE distributor. On that date solicitors on behalf of Yau's Entertainment wrote to Chinatown Entertainment (with a copy to ATVE) complaining about the assertion that Yau's Entertainment was not the Australian exclusive licensee for ATVE for the years 1998 and 1999. Solicitors for Chinatown Entertainment replied, denying making the alleged assertion. 13 ATVE claims that Mr Cheung was favoured over Mr Yau simply because he offered more money. Whether this is true, and the actual sequence of events concerning this relationship are in contest. There is also an issue as to whether, and if so, to what extent, the products supplied to Chinatown Entertainment bore any identification with ATV. 14 In June 1998 another cloud appeared on the horizon. The Lam family sold a controlling interest in ATV to a group from mainland China. It was apparently reported in Hong Kong that ATV would be reducing its production of drama from 390 to 150 hours per annum. By 26 June, Mr Yau was reporting to Mrs Gigi Leung that the sub-licensees were becoming agitated over the news of the proposed drop in the production of drama, which by then was reported in the major Chinese newspapers in Australia. Mr Yau at that stage said he would not accept any Chinese or Taiwanese produced programmes repackaged as part of the ATVE offering as they could be acquired more cheaply elsewhere. He reserved the right to pursue compensation under the licence agreement. Mr Yau's letter of 28 June 1998 is to the same effect. 15 The first notification from ATVE to Yau's Entertainment on this topic was by facsimile transmission on 22 July 1998. The substance of the communication was as follows: "After months of study and analysis, we have undertaken a thorough re-organization of our drama production in order to solve the problem of our inconsistency in our production quality in the past. As you may have already experienced, we have the ability to turn out good products but occasionally we produce some substandard dramas which might have damaged our image in the overseas market. To ensure that our future production is responsive to the market and is up to our stringent quality control, we will only produce 150 hours of drama in 1999 using our current production structure. This is to say that instead of mass production of over 400 hours in the past, we will select the best 150 hours from the 400 hours to produce. In additional, we will look for the best scripts, producers, and/or talents available in Hong Kong and elsewhere and combined these with our production equipment and facilities as well as our strong post-production capabilities to produce dramas under ATV stringent supervision. We estimate that the number hours will be no less than 300 hours in total. By so doing, we believe that we will be able to supply to you consistently premium drama in the future. Unfortunately, we have seen some press only report the so-called reduction in production as contrary to our strategy of combining best resources in the market for our loyal viewers. I am sure you are aware that we need 520 hours of drama to broadcast in our station in Hong Kong annually. If we only produce 150 hours and purchase the balance, how are we going to control the quality and consistency of the purchased products? We suspect that the press may have gotten the wrong idea from our broadcasting of purchased drama recently. Let me assure you that this is a temporary arrangement during this transitional period and does not represent our long term strategy." 16 By facsimile transmission of 3 August 1998, ATVE communicated to Yau's Entertainment the home video programme release for 1999. So far as drama was concerned, it was 300 hours in-house production or joint production; and 300 hours - carefully selected best drama series available from major independent producers. 17 Mr Yau complained about the fact that ATV were only going to supply 150 hours of its programming under the licence agreement at a meeting with senior executives of ATV and ATVE in Hong Kong on 11 September 1998. Mr Au suggested the parties could enter into a new contract for 150 hours and they could then negotiate another contract for the co-produced material which ATVE would supply. Mr Yau refused to do this. 18 In response to a letter threatening to stop the supply of tapes unless licence fees outstanding were paid, Mr Yau wrote the following letter, dated 18 September 1998, to Mr Au (omitting formal parts): "I refer to your letter demanding payment of licence fees and your threat to stop supply of tapes if payment is not received. As you are aware, there is a contract between ATV and me. One of the terms of the Contract is that you supply 390 hours of ATV new drama programmes. On 22 July 1998, you wrote to me and said you would only supply 150 hours of ATV new drama programmes. This is in breach of the Contract. Please advise me whether you intend to breach the Contract, or to honour the terms of the Contract. If you do not honour the Contract, I would suffer substantial damages. The licence fees I pay are based on you supplying 390 hours of ATV new drama programmes. If you do not supply 390 hours, I am paying too much licence fees. My dealers and agents are refusing to pay me because they have heard that they won't be receiving 390 hours but only 150 hours. They said that their business would close if they don't receive 390 hours. As you can see, if you do not honour the Contract, I would be forced to take action to protect my interest. No doubt, my dealers and agents would take action against me. I am surprised that you would decide to cut production to 150 hours when there are Contracts in place requiring to you to supply 390 hours. I imagine that you would be breaching Contracts world wide. Again, Please inform me what your position is in relation to our Contract and the supply of the ATV new drama programmes. Until you clarify the position, it is ridiculous that you demand fees and threaten supply of tapes. Should you stop supply, I shall take immediate action. However, I am sure we can resolve this matter without my taking action. We have had a good business relationship for over 10 years and I trust this good relationship will continue for may [sic] more years." 19 In the meantime, a licence agreement had been entered into between Fee Tang and Chinatown Entertainment in July. In early August, Yau's Entertainment supplied to ATVE tapes of a Vietnamese version of a drama "Legend of Yung Ching" and a copy of a Vietnamese magazine advertisement, the tapes apparently recording the ATV copyright announcement. They had been hired from a shop run by a company of which Mr Wing Cheung was a director. This followed complaints from ATV franchisees that the Fee Tang dramas were being used to create two types of ATV agents. During August, Yau's Entertainment reported to ATVE that four video shops were letting a film entitled "Moc Que Anh", otherwise known as "The Heroine of the Yangs", which was an ATV television series, and that Mr Wing Cheung was a director of each of the four companies running these shops (although apparently the lists of directors were not up-to-date in relation to one of them). Mr Wing Cheung admitted in evidence that he was a shareholder in three of those shops, but claimed that he had no personal knowledge of the alleged illegal hiring and that, to the best of his knowledge, no company with which he was associated ever distributed or sold "The Heroine of the Yangs". 20 In August 1998 Mr Alfred Ng visited Australia on behalf of ATVE to investigate these complaints. He went to three video stores supplying the pirated programme, and took copies of the tapes and photographs of each store. He accompanied Mr and Mrs Yau and their solicitor to a conference with Ms Angela Bowne, a barrister in Sydney, for advice on proceedings to restrain the breach of copyright. The advice was that ATV, as a copyright holder, would need to be a plaintiff in any proceedings. 21 Mr Ng's contemporaneous report of his visit is significant. It completely supports Mr Yau's complaints concerning the activities of Chinatown Entertainment. Indeed, it shows that it was even pirating Fee Tang programmes. It is also instructive in that Chinatown Entertainment was described as "our exclusive licensee of Fee Tang Productions in Australia" (emphasis added). On his return to Hong Kong, Mr Ng, on 3 September 1998, wrote to Yau's Entertainment including the following: "I have spoken to management about this matter. ATV is against theft and agrees that proceedings should be taken. The affidavit will come." 22 In the meantime, Mr Yau had written to Mr Au concerning the piracy of "The Heroine of the Yangs" by letter dated 27 August 1998. In the letter he commented that this kind of incident had never happened in Australia in the last ten years until certain Fee Tang Productions programmes were sold to Wing Cheung. 23 In a conversation after his return to Hong Kong, Mr Ng said to Mr Yau that ATV would not commit itself to be a party to the proceedings, as it was company policy not to use ATV as a party in court actions, although there was an offer to support through documentation. Mr Ng says there was an offer to execute a power of attorney. 24 By letter of 5 September to Mr Ng, Mr Yau, amongst other things, mentioned that there were two issues which had arisen which were linked, one being the pirate tapes, the other was the use of the ATV logo and copyright announcement on other programmes. 25 Shortly after, ATVE forwarded to Mr Yau a draft announcement to be published in Australian newspapers concerning the piracy of "The Heroine of the Yangs", confirming that Yau's Entertainment was the exclusive licensee of ATV programmes, and warned that legal action would be taken against any unauthorised distribution of ATV programmes. 26 On 10 September 1998 Ms Bowne's written advice was received, confirming that ATV had to be a plaintiff in any action commenced in relation to the piracy of "The Heroine of the Yangs". Mr Yau travelled to Hong Kong, and, as I have noted earlier, had a meeting on 11 September with Mr Loo (senior vice president, Finance and Special Projects of ATV), Mr Au and Mr Or, each of ATVE. Whilst there is some dispute about the detail of the meeting, it is common ground that ATV refused to be a party to the proceedings, notwithstanding the legal advice which had been received that this was necessary. This position was confirmed by letter from Mr Au of 18 September 1998, to the following effect: "We confirm the theft of the programme. It is good that you is taking proceedings. ATV agrees with this and will assist. ATV prefers that Yau be the only party. You can protect both parties benefit. The affidavit needs amendment." 27 On 22 September 1998, the solicitor for Yau's Entertainment wrote to Mr Au confirming that ATV must be a party to any infringement proceedings, requesting confirmation that it would be prepared to do so, and that a power of attorney dated 25 April 1997 provided with the licence agreement, was still valid. There was never any substantive reply to that letter. 28 Another issue which was discussed at the meeting in Hong Kong on 11 September was the film "Legend of the Condor Lovers". This was the subject of a licence agreement between ATVE and Yung Tei Pei Workshop (the producer) granting to ATVE the exclusive right to use, market and distribute the film, including the right to dub and sub-title it. The film was to be marketed as a joint production between both companies, with the logos of both parties on the film and on promotional material. It seems that the copyright was to remain with Yung Tei Pei Workshop. 29 In his letter of 3 September to Mr Yau, Mr Ng had offered this film at a special discount price of $900 per hour for 48 episodes. In his reply, Mr Yau explained that while the film was at shooting stage it had been offered to him at $300 per episode and he had rejected it for reasons he set out. He also rejected the offer by ATVE. He added: "In order not to arouse unnecessary misunderstanding, please do not send any paper cutting or promotion materials of "The Legend of Condor Lovers" to us because pirate tape of this drama had already in the black market." 30 It is common ground that at the meeting Mr Yau confirmed his rejection of the offer, and that Mr Yau said that ATVE could offer this programme to others in Australia. There is dispute as to whether it was offered under the licence agreement or as an ad hoc arrangement. Mr Yau also said that his agreement to offer the programme to others was on the basis that it would not be sold under the name of ATV or with the ATV logo. I accept Mr Yau as to this. 31 The three contentious items discussed at the meeting, namely "The Heroine of the Yangs", "The Legend of the Condor Lovers" and the obligation to supply 390 hours of drama, were never satisfactorily resolved. Another dispute simmering along during this period was the issue of licence fees. Put shortly, ATVE were insisting upon payment of licence fees as per the schedule in the licence agreement, whereas Yau's Entertainment was taking the position that there had to be an adjustment of these licence fees to recognise the under-supply of drama which would take place for that year. That issue was never resolved. 32 Meanwhile, another sub-plot was being played out. In June 1998 Yau's Entertainment had supplied master tapes of the programmes "Age of Glory", "Trials and Tribulation", "Immortal Fugitive" and "Poet Mr Tong" to Mr Jason Tan, the manager of Broadway Video and Audio, one of Yau's Entertainment's sub-licensees. Those programmes were not produced by ATV and had no association with it, but had labels applied showing the ATV name and logo. In July and August, Yau's Entertainment supplied another sub-licensee at Eastwood with master tapes of programmes which were not ATV programmes in any sense, but were supplied as ATV programmes including use of the ATV logo. The same thing occurred in August and September, to another sub-licensee at Marrickville. The Eastwood sub-licensee proposed advertising in Australian Chinese magazines, including descriptions of the programmes supplied to him by Yau's Entertainment as ATV programmes but which were not. Mr Yau told him that if he wanted to place an advertisement for his shop he could do it, although at his own expense. This was done, and published on or about 11 September 1998. 33 Mr Wing Cheung sent a copy of the magazine to Mr Au. This was given by Mr Au to Mr Ng, saying that he had obtained it from a "friend". Mr Wing Cheung claims that his purpose in sending it was to show Mr Au Chinatown Entertainment's own promotional advertising. In any event, Mr Ng faxed Mr Yau, drawing attention to the advertisement and said: "The advertisement misleads the market in facts, and appears to give rise to having been borrowed for the promotion of other people's movies. Therefore, our company hopes that your company will be able to effect control of and to make corrections in these type of misinformation." I shall not set out the reply, but on Mr Yau's own evidence it was, to say the least, disingenuous and he was much taxed with it by Mr Murr QC during cross-examination. The basic message, as I read it, was that if you will not pursue Mr Wing Cheung then I will not protect your rights in Australia. 34 For the remainder of 1998 these themes continued to be played. The dispute as to whether ATVE was obliged to provide its own programmes continued, with a corresponding dispute as to whether certain programmes offered and taken at rates less than the licence agreement rates were supplied pursuant to the agreement or otherwise, and there was a dispute as to the impact of this upon the accruing of licence fees. Yau's Entertainment continued to complain about the lack of action against Mr Wing Cheung and Chinatown Entertainment, and the complaints were exacerbated when "Legend of the Condor Lovers" was supplied to Chinatown Entertainment by Fee Tang and then advertised with a poster clearly showing the name ATVE. 35 During January 1999 Mr Wing Cheung telephoned Mr Ng to inform him that he had seen videos in Yau's Entertainment sub-licensees' stores bearing the ATV logo which did not appear to be ATV or ATVE programmes. There was evidence of ATVE having received similar information from other sources at about that time. Mr Ng asked Mr Wing Cheung to collect and send sample tapes of the programmes. He did this and supplied the tapes by early March. When examined, they were either programmes acquired by ATV for telecasting in Hong Kong only or were programmes with no connection with ATV at all but bore the ATV logo. 36 It was decided that representatives of ATVE should go to Australia to investigate the matter, and by 30 March Ms Li, a senior marketing executive, and Mr Chan, a corporate lawyer, met Mr Wing Cheung at their hotel and he took them to four video shops in Sydney which were sub-licensees of Yau's Entertainment. They visited Gilbert & Tobin, solicitors, prior to actually visiting the stores. A number of videos were collected and observations made as to posters and the like. This confirmed the evidence collected by Mr Cheung. 37 The evidence of Mr and Mrs Yau was that those programmes which were ATV programmes which they had not received from ATV had been taped from Hong Kong free-to-air television by contacts in Hong Kong and received from them. It was said that practice had been authorised during the discussions with Mr Tsao on his visit to Australia in February 1992, as had the practice of presenting non-ATV programmes as ATV programmes in the sub-licensees' shops. It was said that the practice of taping was assisted by ATV staff notifying Yau's Entertainment of the timing of the programmes to enable recording. 38 By letter dated 7 April 1999, Gilbert & Tobin, on behalf of ATV and ATVE, said, inter alia: "Our clients have recently become aware that your company is supplying its Sub-Licensees with video programs bearing the ATV Logo which are not programs produced by or associated with our client, and falsely representing to Sub-Licensees that such programs are ATV product lawfully provided to them under your Distribution Agreement with ATV and, in turn, falsely representing to the general public that such programs are those of our client. … The Sub-Licensees from whom we have statements confirm that they received the above programs from you with the ATV Logo, displayed both on the label and on the video tape. The above programs were not produced, co-produced or otherwise associated with ATV. Many are of inferior quality or below the established production standards of ATV programs. Our client has also ascertained that you have recorded programs broadcast on ATV in Hong Kong and distributed those programs under the ATV label to your Sub-Licensees. These programs were licensed to ATV for broadcast only in Hong Kong and were not the subject of the Agreement." The solicitors alleged that conduct constituted, amongst other things, a repudiation of the agreement, and they threatened litigation in relation to trade mark infringement, breaches of the Trade Practices Act, copyright infringement and passing off. The letter proceeded: "In relation to the Agreement, your conduct in distributing non-ATV programs with ATV Logos has denied our client the benefit of the whole Agreement. Furthermore, such conduct is a breach of the implied term that the ATV Logos would not be used for another purpose. This breach is not capable of remedy within the meaning of Clause 15(b) of the Agreement as our client has already suffered serious irreparable damage. Such conduct constitutes a repudiation of the Agreement entitling our client to immediately accept such repudiation and terminate it. You should accept this letter as notice of termination. …" 39 In the reply from the solicitors for Yau's Entertainment of 9 April 1999, it was said, inter alia: "We are unable to be more specific at this stage, however, can indicate that approval has been obtained from your client to use the ATV logo. In relation to recorded programmes broadcast on ATV in Hong Kong, we request particulars of those programs so that we can obtain instructions." 40 On 13 April 1999, ATVE entered into a licence agreement with Chinatown Entertainment, to commence on 19 April 1999, and this was publicly announced on 19 April 1999. Yau's Entertainment thereafter supplied ATV programmes to its sub-licensees, some having been obtained from Canada and some taped from the ATV channel in Hong Kong, and an advertisement was published in the Australian Chinese Daily dated 28 April 1999 which claimed that Yau's Entertainment was the exclusive licensee of the programmes so obtained. 41 These proceedings were commenced on 21 April 1999.

At a glance

Court

Decision date

Before

Source

Judgment (15 paragraphs)

Parties

Cases Cited (8)