Wood, Teresa Alison v. Topskill Ltd t/a Dansinn Dance Studios
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DCCJ 6667/2002 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 6667 OF 2002 ____________ BETWEEN
____________ Coram: H.H. Judge Chow Hearing dates: 26th and 27th November, 2009 Date of written submission: 5th January, 2010 Date of handing down Judgment : 19th March, 2010 Judgment
1.In these proceedings, the Plaintiff claims against the Defendant for (i) $65,000, being the balance of purchase price due under a sale agreement of her business; (ii) $25,000, being rental deposit she was entitled to receive, but forfeited by reason of the Defendant’s breach of a contractual term; and (iii) $120,000, being 3 months’ pay in lieu of notice of dismissal of her employment with the Defendant. She also claims against the Defendant for (i) $8,840, being money refunded to students on behalf of the Defendant, and (ii) the return of her property, i.e. 341 compact discs, which were in the possession of the Defendant. On the other hand, the Defendant counter-claims against her for a number of things. 2.The Plaintiff was a dancing teacher. In 1994, she moved from the United Kingdom to Hong Kong. In 1995, she started her own business; she set up the Teresa Wood Dance Studio (“TWDS”), and taught around in schools and private clubs. In 1999, the address of her studio was at 1/F, Kai Kwong House, 13 Wyndham Street, Central, Hong Kong (“the Wyndham premises”). In or about 1998, she came to know Mr. Throstur Johannsson (“TJ”) of the Defendant, which carried on dancing instructor and/or dance studio business in the name of Dansinn Dance Studios at 69 Jervois Street, 21/F, Sheung Wan, Hong Kong (“the Defendant’s Premises”). 3.In around March 2000, there were discussions between her and TJ about the sale of the TWDS business. In April, 2000, an oral agreement was reached between the parties for the sale of the TWDS business to the Defendant. On or about 15 April 2000, pursuant to the oral agreement, the Plaintiff moved to the Defendant’s premises, 10 packets and office effects, including a bag containing compact discs. 4.On 19 May, 2000 TJ produced two written contracts, namely a sale agreement (“Sale Agreement”) and an employment contract. The Plaintiff and the Defendant signed these 2 agreements. The Sale Agreement was drafted by a student of TJ. On the same day, she passed the cheque book (with cheques pre-signed by her) to TJ. On 20 May 2000, the Plaintiff left Hong Kong for Tokyo and USA for a 4 months’ leave, to return in September 2000. Her contract of employment with the Defendant was to commence on 1st September, 2000. 5.TJ assigned two persons, namely, Ellen and Eddie Drofin Bjornsdottir (husband and wife) to take over the running of TWDS. They were employed by the Defendant at the material time. On a date unknown, Ellen, signing as the manager of TWDS, wrote letters to students, asking them to make cheques payable to the Defendant. On or before 13 June 2000, Ellen and Eddie left the employment of the Defendant. Because of their departure, dance classes of TWDS were cancelled. Helga, the wife of TJ, wrote a letter to the Quarry Bay School on 13 June 2000 to that effect, indicating that there were no teachers and that the classes would continue when the Plaintiff was back in Hong Kong in September 2000. 6.In late July, the Plaintiff returned to Hong Kong for about 3 days. During this period she removed a sound system from the Wyndham premises. At the request of TJ, she also wrote a letter to the landlord of the Wyndham premises to take advantage of the break clause to obtain an early termination of the rental agreement of the Wyndham premises in September 2000. 7.The Defence Counsel submits that $4,000 appears to have been given to the Plaintiff on 16th April 2000. During examination in-chief, TJ stated that the Plaintiff had said she was tight on money and had asked him to advance money to her for general living expenses. From a bank deposit slip dated 3rd May 2003, she acknowledged that she had borrowed this sum from TJ and had used it to pay the rent for April. She also stated that TJ had taken this sum of money back afterwards. She wrote on the deposit slip “Throstur took 4000 T own him”. It was also written on the deposit slip “For April Rental I only paid 8500 and I borrowed $4,000 from Throstur”. The Defence Counsel said that TJ had never seen this Bank Deposit record and he has denied ever taking the $4,000 back. The point is there is no reason for the Plaintiff to put down something untrue on the record some years ago. I find that the record reflects the truth of what actually happened at the material time. 8.On 19th May 2000, the Plaintiff signed a receipt, acknowledging the amount of money received:-
There is no reason for her to write something untrue at that time. Had the sum of $4,000 been paid as part of the purchase payment for buying TWDS, this sum would have been included as part of the purchase money, making the total sum received for the sale of TWDS to be $39,000 ($35,000 + $4,000). 9.On 18th August, 2000, TJ sent an email to the Plaintiff. It states, inter alias,
This is proof that the purchase money paid to the Plaintiff is only $35,000. If TJ had paid her a total of $39,000, for the purchase of TWDS, he should have stated in the above email that $39,000 was the sum actually paid. But he only mentioned $35,000, and not $39,000. The above receipt and the email reveal the truth of the matter. I hold that the sum actually paid by TJ to her is $35,000, and not $39,000. The sale of the TWDS business is $100,000. Hence the balance which remains unpaid is $65,000 ($100,000 - $35,000). The schedule of assets 10.The Plaintiff said that a schedule (“Schedule”) was shown to TJ during the negotiations in a restaurant at Old Baily Street. TJ denied that he saw the schedule. Clause 2 of the Sale Agreement states: “All assets of the business including but not limited to all equipment and properties at the Premises…… are to be included; a schedule of all properties owned by TAW and used in the business with a full description of each is annexed hereto. CD’s are not included in price and will remain as Teresa’s own property”. No schedule was attached to the Sale Agreement. It was the Defendant which procured this Sale Agreement. It was drafted by one of his students. TJ must have told that student about the Schedule, otherwise the above Clause would not have come into existence. Hence the Defendant must have intended that the Schedule shown by the Plaintiff during the meeting to be annexed to the Sale Agreement. Both parties must have agreed on the contents of the Schedule prior to the signing of the agreement. TJ claimed that it is a mistake of not deleting this part of the clause. This cannot be the case. 11.When they were negotiating in the restaurant, they must have discussed over the contents of the Sale Agreement, because this is the business to be talked about on that day. In doing so, they must have perused and checked to accuracy the contents of the Sale Agreement. In the Sale Agreement the sentence “CD’s are included in price and will remain as Teresa’s own property” was in her handwriting. So she put down this sentence during the meeting. Prior to that they must have read over and discussed over contents of Clause 2 which only contained one sentence. That one sentence included “a schedule of all properties owned by TAW and used in the business with a full description of each property is annexed hereto.” It is simply inconceivable that TJ could have omitted to delete this part of the sentence, if he had intended to do so. I find that the Schedule was shown to TJ and the parties intended that the Schedule was to be incorporated to the Sale Agreement. 12.On 19 May 2000, the management and ownership of the business passed to the Defendant after the Sale Agreement had been signed. She handed over to TJ the keys of the Wyndham premises, the business documents, the pre-signed cheques; she performed all that she was required to perform under the Sale Agreement. On the next day she flew away from Hong Kong for 4 months. Hence she had no physical control of the TWDS business. The control remained with the Defendant. 13.In TJ’s witness statement, he said that “The sale of Business was never completed.” After the management and control had been passed to the Defendant on 19 May 2000, the sale was completed. The writing of letters by Ellen (the Defendant’s employee) to students prior to 13 June 2000, the writing of letter by Helga, the request of TJ to the Plaintiff to write to the landlord of the Wyndham premises, and the escorting off of the Plaintiff from the Wydham premises in early September 2000 all show that the Defendant was in control of the TWDS. If the sale of the TWDS business had not been completed, the Defendant could not have been in control of the TWDS business. 14.The Defence Counsel submits that the Plaintiff’s removal of the sound system from the Defendant’s premises some time in July, 2000 evinced an intention on her part that she no longer intended to be bound by the Sale Agreement, and repudiated the same. The Defendant accepted the repudiation, and rescinded the Sale Agreement by an e-mail dated 18th August, 2000 to the Plaintiff. The sale of the TWDS business to the Defendant was therefore never completed. But the sale was completed on 19th May, 2000 after the Defendant had taken control of the TWDS business. It was still in control of the Wyndham premises (and the business pertaining to it) in early September, 2000, when its staff escorted off the Plaintiff from the Defendant’s premises, forbidding her to commence her employment with the Plaintiff. The Defendant only handed over the keys if the Defendant’s premises on 22nd September, 2000. 15.TJ alleged that the Plaintiff made fraudulent misrepresentation to induce him to enter into the Sale Agreement. The Defendant alleged that the Plaintiff said that the business was “financially sound, owed fees to cover expenditures (in the summer months) and that the business owed no debts”. The Loss and Profit Account showed a profit of more than $20,000 in the period between April 1999 and January 2000. So the Business was profitable. 16.The Defendant said that the Business had actual debts of $800,000. TJ was told about a loan of about $600,000 to $700,000 made personally by the Plaintiff’s fiancee to the Plaintiff personally. In the Sale Agreement, it was specially handwritten that the Defendant would not be liable for any existing debts, which were the responsibilities of the Plaintiff. Therefore there was no misrepresentation. I adjudge that the Plaintiff did not make any misrepresentation. The CDs 17.The Plaintiff’s Counsel submits that the photograph with the date 17 May 2000 should be taken as proof of the number of CDs delivered to TJ to be higher than 86 and closer to 341. But according to the Plaintiff’s evidence, the CDs were delivered from the Wyndham premises to the Defendant’s premises before 17 May 2000; so this photograph cannot be relied upon to prove the volume of CDs delivered to the Defendant’s premises. There is no substantive evidene to show the actual volume of CDs delivered. Hence she is only entitled to the 86 CDs, which were in TJ’s possession, as admitted by him. 18.The Defendant failed to pay the rent to the landlord from June 2000 onwards, thereby causing the landlord to forfeit the rental deposit of $25,000. He was in breach of the Sale Agreement to pay rent since 1 June 2000. This amount of $25,000 was stipulated as an excluded item in the Schedule to be returned to the Plaintiff at the expiry of the tenancy. The Defendant is therefore liable to pay this amount to the Plaintiff. 19.It is common ground that both the sale of the business and the employment of the Plaintiff are one. Since the sale was completed, the employment of the Plaintiff commenced upon the completion of the sale of the business. The Defendant escorted the Plaintiff off the premises on 3rd September 2000, and did not allow her to commence the employment with the Defendant. This constituted a breach of the terms of the employment agreement. So the Plaintiff is entitled to a 3 months’ payment of salary in lieu of notice of termination, in the amount of $120,000. 20.I accept the plaintiff’s evidence that she made a refund of $8,840 to parents, as stated in paragraph 15 of her witness statement. The Counter-claim 21.Under paragraph 44 of the Amended Defence and Counterclaim, the Defendant has set out 11 items of loss and damage. Items (1), (2) and (3) were expenses incurred for the Defendant’s business after the sale of the TWDS business to the Defendant. These expenses have nothing to do with the Plaintiff. 22.The sum of $4000 under item (4) was taken back by TJ. In TJ’s email dated 18th August, 2000, he said that he paid the Plaintiff $35,000 and not the Defendant. Further, it was lent to the Plaintiff by TJ as a personal loan. 23.The total sum claimed under items (5), (6) and (7) amounts to $35,000. Since the sale of the TSDS business was completed on 19th May, 2000, the defendant has no right to claim this sum back. 24.Under items (8) and (9), the sums of $2,500 and $30,000 claimed were expenses utilized for the Defendant’s business. They have nothing to do with the Plaintiff. 25.Under Counter-claim (10) the Defendant claims for “the sum of HK$75,000 being the amount of income which the Defendant could have earned if Mr. Johannsson and the staff of the Defendant had not been engaged in matters relating to the sale of business by the Plaintiff to the Defendant”. The Defendant has failed to show what wrongs the Plaintiff has done, causing him to suffer such a loss. So this claim must fail. 26.Under claim item (11), the Defendant claims for the loss of the Defendant’s reputation and goodwill for HK$500,000 or any other sum that this Honourable Court thinks fit. According to T.J. the Action was reported by the South China Morning Post that brought about the loss of reputation and goodwill. The Defendant has not show how the report of a legal suit could bring about loss of reputation and goodwill. 27.I dismiss all the items of counter-claim. 28.I make an order that the Defendant do, within 14 days from today, return to the Plaintiff 81 CDs and pay to the Plaintiff the sum of $218,840 with interest thereon, at judgment rate, commencing from 28 October 2002 until satisfaction. Costs 29.I make an order nisi, to be made absolute in 14 days’ time, that the Defendant do pay costs of this Action to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel.
The Plaintiff: represented by Mr. Timothy Y H Wong, instructed by Messrs. Yam & Co., Solicitors. The Defendant: represented by Miss Verna Lui instructed by Messrs. Lo & Lo, Solicitors. |