Hong Kong Riding Union Ltd v. Instinct Creations Ltd

DCCJ 5078/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5078 OF 2005

--------------------

BETWEEN

--------------------

Coram : His Honour Judge Chow in Chambers

Date of hearing : 18^th July, 2006

Date of handing down Decision : 1^st September, 2006

DECISION

1.This is the Plaintiff’s application for summary judgment against the Defendant for the sum of $390,000, pursuant to Order 14 of the Rules of the District Court.

2.By an agreement dated 16^th August 2004 (the 1^st Agreement), the Plaintiff agreed to license to the Defendant and the Defendant agreed to take and run the recreational facilities known as Dragon Boat activity, within a recreation and leisure centre known as the Hollywood Water Recreation and Leisure Centre (“Hollywood”) for a term of 2 years from 1 October 2004 to 30 September 2006 at a licence fee of $10,000.  The Plaintiff alleges that the Defendant has since 1 October 2004 failed to pay the licence fee and is claiming the licence fee in the sum of $120,000.

3.By another agreement dated 10 September 2004 (“the 2^nd Agreement”), the Plaintiff agreed to let and the Defendant agreed to take the operation and running of Hollywood together with the recreational facilities and activities programs therein for a term of 2 years from 1^st October 2004 to 30^th September 2006 at a monthly rental of $30,000 for the 1^st year and for $35,000 for the 2^nd year.  The Plaintiff alleges that the Defendant has since 1^st January, 2005 failed to pay the monthly rental and is claiming a sum of $270,000.

4.The Plaintiff submits that the Defendant has never sought to rescind, seek rescission or purport to terminate the 1^st Agreement or the 2^nd Agreement.  Therefore both Agreements still continue in subsistence up to the date this application is made.

5.The Defendant raised various defences against the Plaintiff’s claims.  It alleges, inter alias, that the 1^st Agreement has been incorporated into the 2^nd Agreement.  In his affirmation dated 20^th April 2006, Mr. Yau Siu Yuen (the Defendant’s manager) said,

“	10.	On 16th August 2004, on behalf of the Defendant, I signed the 1st Agreement as exhibited in Tang’s affirmation with the Plaintiff.  The Defendant paid $20,000 deposit and $10,000 rent to the Plaintiff on 16th August 2004.  Neither the Plaintiff nor the Defendant had arranged stamping of the 1st Agreement because the 1st Agreement had been incorporated in the 2nd Agreement and had no effect after the signing of the 2nd Agreement.
	……………
	15.	The 1st Agreement had been effectively incorporated into paragraph 11 of the 2nd Agreement.  The Defendant paid HK$100,000 deposit and HK$30,000 advanced rental.  The Plaintiff and the Defendant agreed that the Defendant’s payment of HK$30,000 on 16th August 2004 be transferred to the 2nd Agreement, making the total advanced rental of HK$60,000.00.  Because of the various events as pleaded in paragraphs 17 to 20 of the Defnece, the Defendant refused to pay any further rent to the Plaintiff.”
		(Underlines provided)

6.On 23 June 2006, Mr. Tang Koon Yung, a director of the Plaintiff, made a second affirmation.  Specifically dealing with paragraph 15 of Mr. Yau’s affirmation, he said, at paragraphs 7 and 8 of his affirmation:-

‘	7.	In paragraph 15 Yan’s Affirmation, the Defendant alleges that the 1st Agreement had been effectively incorporated into paragraph 11 (clause 11) of the 2nd Agreement.  In this respect, I must say that clause 11 of the 2nd Agreement related to “Speed Boat activity” only.  By clause 11 of the 2nd Agreement, the Defendant agreed to hire the Speed Boat activity at a licence fee of HK$10,000.00 after the then existing agreement between the Plaintiff and the then licensee had expired.  Clause 11 of the 2nd Agreement further supports that the Dragon Boat activity under the 1st Agreement is separated from the activities within Hollywood under the 2nd Agreement.
	8.	Even if, which is denied, the Defendant had successfully established that it entered into the 2nd Agreement as a result of misrepresentation, as alleged, made by me on behalf of the Plaintiff, the alleged misrepresentation would have no relation to the 1st Agreement at all and the Defendant has no defence or excuse for denying its contractual obligation to pay licence fee to the Plaintiff under and pursuant to the 1st Agreement.’

7.In his affirmation Mr. Tang did not traverse the allegation made by the Defendant that the Defendant’s payment of $30,000 on 16^th August 2004 under the 1^st Agreement had been transferred to the 2^nd Agreement, making the advanced rental of $60,000 under the 2^nd Agreement.  The Plaintiff has all along been legally represented.  If Mr. Tang disagrees with this allegation, he should have refuted it in his affirmation.  If the 1^st Agreement had been incorporated into the 2^nd Agreement, the 1^st Agreement would no longer continue upon the creation of the 2^nd Agreement.  This would have the effect of diminishing the quantum (if any) to be awarded to the Plaintiff.  This is a dispute that ought to be resolved at trial.

8.The Defendant did not raise this defence in its defence.  But this does not preclude it from raising it in its affidavit, because under Order 14, r 4(1) he is entitled to raise this defence in his affidavit.  Order 14, r.4(1) provides that “A defendant may show cause against an application under rule 1 by affidavit or otherwise to the satisfaction of the Court.”  Therefore the Plaintiff’s submission that the Court should simply ignore this unpleaded allegation cannot stand.

9.The Plaintiff’s case is that the 1^st and the 2^nd Agreements are separate distinct agreements and summary judgment should be entered in respect of the payments due under these two Agreements.  The Defendant has raised a triable issue that the 1^st Agreement was incorporated into the 2^nd Agreement.  This is a material issue of fact that ought to be resolved at trial.  In these circumstances, summary judgment in favour of the Plaintiff should not be entered.  I therefore dismiss the Plaintiff’s application.

Costs

10.I make an order nisi, to be made absolute in 14 days’ time, that the Plaintiff is to pay the costs of this application to the Defendant, to be taxed, if not agreed, with certificate for Counsel.

The Plaintiff : represented by Mr. Jeremy S K Chan, instructed by M/S. Ma Tang & Co., Solicitors.

The Defendant : represented by Mr. Chu Wai Kei, instructed by M/S. Au Yeung, Cheng, Ho & Tin, Solicitors.