Composers and Authors Society of Hong Kong Ltd v. Sun Satellite Television Compancy Ltd

DCCJ 4644 /2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4644 OF 2006

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BETWEEN

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Coram: Deputy District Judge W. C. Li in Chambers

Date of Hearing: 20^th March 2007

Date of Handing Down Decision: 30^th March 2007

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D E C I S I O N

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1.The Plaintiff (“CASH”) was a company limited by guarantee whose main objective was to collectively administer and enforce the performing, broadcasting, cable transmission and reproduction rights of composers and authors of musical works.

2.The Defendant (“Sun Satellite”) was a company which was involved in the satellite broadcast of a television programme channel known as Sun TV 陽光衛視  (“the Channel”) with signal uplinking from Hong Kong.

3.30% shareholdings in Sun Satellite at all relevant times were held by Sun Satellite Television Holdings Limited (“Sun Shareholding”) and the remaining 70% shareholdings in Sun Satellite were originally owned by Strategic Media International Limited (“SMI”). Sun Shareholding was 100% owned by a Company called Tidetime Sun (Group) Limited (“Tidetime Sun”). SMI’s interest in Sun Satellite was sold to Elite Dragon International Limited (“Elite Dragon”) on 13 July 2005. The management and operation of Sun Satellite  after the completion on 13 July 2005 was contemplated to be taken over by Tidetime Sun.

4.This was a claim  by the Plaintiff, CASH, for licence fees, against the Defendant, Sun Satellite. The sole issue concerned was whether CASH and Sun Satellite had made a valid contract to pay such licence fees.

5.There was no dispute that CASH and Sun Satellite entered into a licence agreement in writing dated 12 May 2003 (“the Licence Agreement”) whereby CASH granted Sun Satellite a non exclusive licence to broadcast CASH’s repertoire via the channel from Hong Kong between 8 August 2000 and 31 March 2003 at the licence fee of HK$900,000.00. This amount was fully paid by the Defendant.

6.The Plaintiff’s case was that on 5 May 2004, Stephen Shin of Sun Satellite had an agreement with Geoffrey Lau of CASH that Sun Satellite would pay a monthly licence fee of HK$28,125.00 to CASH for the period from 1 April 2003 to 31 March 2004. This agreement between CASH and Sun Satellite was not in dispute. An invoice was sent by CASH on 5 May 2004 and written demands for payment were also sent to Sun Satellite and to its parent companies.

7.It was common ground that on 8 June 2005 that Matthew Cheng and Sophie Gong acting for and on behalf of Sun Satellite met Geoffrey Lau of CASH to discuss the licence fees payable from 1 April 2003. The Channel of the Defendant was all along broadcasting the repertoire of CASH at all relevant times.

8.Following the discussion in this meeting, Geoffrey Lau sent an e mail to Matthew Cheng and Sophie Gong the following day on 9 June 2005 setting out some proposals. It was proposed in this e mail that a lump sum fee of HK$540,000.00 would be paid by Sun Satellite for the period from 1 April 2003 to 31 March 2005, and from 1 April 2005 onwards, the licence fees would be HK$28,125.00 per month, subject to annual adjustments by reference to the consumer price index for each year, or 5% of Sun  Satellite’s net profit.

9.The Plaintiff’s case was that on 12 July 2005, Matthew Cheng told Geoffrey Lau that Sun Satellite would not accept any formula pegged to its net profits, and would only agree to the fixed rate of HK$28,125.00 per month (subject to adjustments for the subsequent years). Hence the Defendant counter-offered that the terms of the agreement were those as set out in Geoffrey Lau’s e mail on 9 June 2005 save that the licence fees for the subsequent years after 1 April 2005 would be HK$28,125.00 per month (subject to the said annual adjustment for subsequent years), and not 5% of its net annual profits. The Plaintiff’s case was that following the counter offer, an oral agreement was reached on 12 July 2005 between Matthew Cheng acting for and on behalf of Sun Satellite and Geoffrey Lau of CASH on the terms of the Defendant’s counter offer, that was, 

(1)      Sun Satellite would pay a lump sum of HK$540,000.00 for the outstanding licence fees for the 2 years from 2003/2004 and 2004/2005;

(2)      This sum would be paid by 2 equal instalments of HK$270,000.00 each  by the end of July 2005 and by the end of September 2005;

(3)      The licence fees from 1 April 2005 to 31 March 2006 would be HK$28,125.00 per month;

(4)      From 1 April 2006 to 31 March 2007, the monthly licence fees would be HK$28,125.00 per month adjusted by the annual change in the Composite Consumer Price Index (“CPI”) on Hong Kong of 2005 plus 5%, with a minimum increase of 0% and a maximum increase of 10%;

(5)      From 1 April 2007 to 31 March 2008, the monthly licence fee would be the rate of last year adjusted by the same mechanism, using CPI of 2006;

(6)      Payments of licence fees during 1 April 2005 to 31 March 2008 shall be made quarterly in arrears (i.e. on 31 March, 30 June, 31 September, and 31 December of each year); and

(7)      Interest will be charged for late payment of the licence fee at the best lending rate of HongKong and Shanghai Banking Corporation plus 2.5% per annum until payment in full.

10.This oral agreement was further recorded in an e mail sent by Geoffrey Lau of CASH to Matthew Cheng and with copy to Sophie Gong, together with these words, “I refer to our deal made over the phone just then and would like to recap the agreed terms as follows.” Unlike previous emails, Geoffrey Lau did not mention that this oral agreement was subject to further approval.

11.Both Mathew Cheng and Sophie Gong did not reply to this email from Geoffrey Lau.

12.A further email dated 14 July 2005 sent by Geoffrey Lau to Matthew Cheng and Sophie Gong also referred to (inter alia) “a verbal agreement on 12 July 2005” that they had reached. Again, Matthew Cheng or Sophie Gong did not make any response to this email or said anything to refute the fact that an oral agreement had been reached between the parties on 12 July 2005.

13.CASH sent an invoice to Sun Satellite for HK$540,000.00 on 14 July 2005.

14.On 1 August 2005, CASH received a cheque dated 21 July 2005 from Sun Satellite for the amount of HK$270,000.00.

15.No formal agreement was signed between CASH and Sun Satellite. Sun Satellite refused to make further payment and CASH brought this action on the oral agreement.

16.The Plaintiff, CASH, applied for summary judgment.

17.From the affirmations filed by the Defendant, it was alleged that (1) the oral agreement was not a binding agreement; and (2) Matthew Cheng had no authority to enter into the oral agreement.

18.It was common ground between CASH and Sun Satellite that on 21 July 2005, Sun Satellite paid to CASH a sum of HK$270,000.00. There was no suggestion that this sum paid by Sun Satellite to CASH was for anything else other than for the first instalment of the HK$540,000.00 payable under the oral agreement.

19.The sum of HK$540,000.00, as seen in the Defendant’s affirmations, was also recognized by Sun Satellite to be owing to CASH.

20.The sum of HK$540,000.00 was part of the oral agreement that had been reached between CASH and Sun Satellite on 12 July 2005 for payment of the licence fees for the two years that had passed, i.e. 2003/4 and 2004/5.

21.It is clear from the evidence that CASH and Sun Satellite had come to an agreement on all the essential elements of a contract. A formal agreement was to be drafted and executed between the parties. However unlike contracts for the sale of land, an oral contract would equally be binding between the parties when all the terms were agreed upon. Lord Hatherley sets out the principle in Rossiter  v  Miller (1878) LR 3App Cas 1124, 1143:

“It has been established for far too long a time, and by some precedents in your Lordships’House, that if you can find the true and important ingredients of an agreement in that which has taken place between two parties in the course of a correspondence, then, although the correspondence may not set forth, in a form which a solicitor would adopt if he were instructed to draw an agreement in writing, that which is the agreement between the parties, yet, if the parties to the agreement, the thing to be sold, the price to be paid, and all those matters, be clearly and distinctly stated, although only by letter, an acceptance clearly by letter will not the less constitute an agreement in the full sense between the parties, merely because that letter may say, We will have this agreement put into due form by a solicitor. If it is stated in so many plain and express terms that one of the very terms of the agreement itself was that it should not be a concluded agreement until a solicitor intervened and drew a formal agreement, if you find that to be a term of the agreement itself, well and good, if not, the agreement stands.”

The oral agreement between CASH and Sun Satellite had agreed upon the terms on the services to be provided or had been provided, and the monies to be paid, and no other essential ingredients were left for further agreement. The oral agreement was obviously a complete agreement. Geoffrey Lau had referred to the agreement reached in his emails to Matthew Cheng and Sophie Gong on two occasions, and neither Matthew Cheng and Sophie Gong made any reply to say they had any contrary view. Pursuant to this oral agreement, Sun Satellite had acted upon it and sent a cheque for HK$270,000.00 to CASH, being the first instalment payment of the licence fees for 2003/4 and 2004/5.

22.Matthew Cheng argued that he was certain that the oral agreement was not a binding agreement because Sun Satellite’s management was considering linking the licence fees to its net profit. This argument appeared to be contrary to the evidence of the case.  The linking of the licence fees to the net profit of Sun Satellite was a proposed option but was rejected and not agreed upon between the parties. It was obvious that neither party had this option in mind when the oral agreement was reached.  When the oral agreement was reached and reiterated in Geoffrey Lau’s e mails to Mathew Cheng and Sophie Gong, this option of linking the licence fees to the net profit of Sun Satellite was no longer mentioned, and had been left out ever since.

23.As to the authority of Matthew Cheng, Matthew Cheng on 12 July 2005 was the Company Secretary of Sun Satellite and also the Financial Controller of Tidetime Sun, the company which was to take over the entire management of Sun Satellite. In the negotiation, CASH being represented by Geoffrey Lau, and Matthew Cheng acted for Sun Satellite, and clearly Matthew Cheng had actual authority to attend the meetings with CASH and to negotiate on all the terms on behalf of Sun Satellite. Matthew Cheng also had the authority, following the negotiation to take the matter up to the top management for final approval, and to come back to CASH with the message or decision of the top management, to agree to the terms and to reach an agreement between the parties. An agent who does not have ostensible authority to conclude an agreement may have ostensible authority to communicate the fact that authority has been obtained (First Energy  v  Hungarian International Bank Limited (1993) 2 Lloyd’s Rep 194, 204 (Steyn LJ); 206-27 (Evans J); 208 (Nourse LJ).

24.The act of Sun Satellite in implementing part of the oral agreement in paying the first instalment of HK$270,000.00 was also clear evidence that they had accepted the oral agreement and authorised this payment. In ratifying this oral agreement, Sun Satellite could not later turn round and deny the authority of Matthew Cheng to enter into the oral contract on its behalf.

25.In Anglo-Italian Bank  v  Wells (1878) 38 LT 197, 201 (cited in Hong Kong Civil Procedure 2007 14/4/8), Sir George Jessel MR said:

“When the Judge is satisfied not only that there is no defence but no fairly arguable point to be argued on behalf of the defendant it is his duty to give judgment for the plaintiff.”

26.In Re Safe Rich Industries Ltd (1994) HKLY 115, as per Bokhary JA (as he then was):

“The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized because failure to recognize it would create a debt-dodger’s charter – that whether the defendant ‘s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.”

27.In the present case, there was clearly a binding agreement between CASH and Sun Satellite. The fact that a formal written agreement had not been signed did not preclude the Plaintiff from taking out this action to recover what were due to them from the Defendant for the services that the Defendant had received and enjoyed over the years. The first instalment paid was also obvious that the Defendant recognized that they had a binding agreement between them. The first instalment was also paid with the authority of Sun Satellite, and even if Mathew Cheng had no authority to enter into contract on behalf of Sun Satellite, albeit this was not what the evidence had shown in this case, Sun Satellite had clearly ratified the contract by making the payment for the first instalment and continued enjoying all the benefits under the contract over the years. There appeared to be no dispute between the parties over the amounts of the licence fees payable under the oral agreement. The Defendant only argued that the oral agreement was not binding on them. The claim was for a total of HK$697,021.89, being the licence fees calculated up to 30 June 2006.

28.For the above reasons, I am satisfied that the Defendant has no defence to the Plaintiff’s claim and judgment against the Defendant should be entered for the Plaintiff. Judgment is therefore entered in favour of the Plaintiff for the amount of HK$697,021.89. Interest is also ordered to be payable on the judgment amount/s by the Defendant at the rate as claimed and as detailed in Paragraph (2) of the Inter partes summons dated 11 October 2006. I also order that the Defendant is to pay the Plaintiff’s costs of this action, to be taxed if not agreed, with Certificate for Counsel. This shall be a cost order nisi and be made absolute 14 days after judgment.

Representation:

Mr. Bernard Man instructed by Messrs. Wilkinson & Grist for the Plaintiff

Mr. Patrick Chong instructed by Messrs. Chong & Yen For the Defendant