MODERN MARKET MANAGEMENT LTD v. MA WAI PIU AND OTHERS

DCCJ1441&1442&1443&1444&1445&1446/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1441 & 1442 & 1443 & 1444 & 1445 & 1446  OF 2006

(HEARD TOGETHER)

J U D G M E N T

1.  This is a hearing of six summonses dated 27 April 2006 for a summary judgment under Order 14 against each of the defendants in the respective actions.  In these six actions, the plaintiff as the licensor of Chung Fu Shopping Centre, Ground Floor, Tin Shui Wai, New Territories, sues the respective defendants who have been licensees of the stalls therein.  The ground floor of the Shopping Centre is a market (“the market”).  The six actions are broadly similar in their circumstances and hence they are heard together for convenience sake.  The defendants in DCCJ1441-1446 of 2006 are named as D1, D2, D3, D4, D5 and D6 respectively in this judgment.

Background

2.  Since 16 February 2000, D1, D2, D4 and D6 started to rent their respective stalls in the market.  On 21 February 2000, the plaintiff started to take up the tenancy of the market and became the licensor of the stall licensees of the market.  On 16 February 2005, D3 and D5 started to rent their respective stalls in the market.  On 17 March 2005, all the defendants except D1 entered into licence agreements with the plaintiff from 16 February 2005 to 15 February 2006.  On 6 September 2005, D1 entered into a licence agreement with the plaintiff from 16 August 2005 to 15 February 2006.

3.  On 15 February 2006, all the licence agreements between the plaintiff and the defendants expired.  It is the plaintiff’s case that it had issued notices to quit dated 8 August 2005 to all the defendants, notifying them that they had to deliver vacant possession of their stalls on 15 February 2006.  This is not disputed by the defendants for the purpose of this hearing.

4.  On or about 31 December 2005, D2 signed an application form for renewal of the licence agreement (“the application form”).  She then refused to sign a formal licence agreement and refused to pay the new rent.  It is her case that she signed the application form without being given sufficient time for due consideration.  She was not even given a copy of the application form which she had signed. 

5.  In or about January 2006, the other defendants were notified by the plaintiff of the amount of the new rate, which was higher than the original rent under the licence agreements.  There were then disagreements between the plaintiff and the defendants over the amount of new rent for the new licence agreements.  No new licence agreements have been entered for D1, D3, D4, D5 and D6.

6.  From 15 to 17 February 2006, the defendants wrote to the landlord of the plaintiff, namely, The Link Management Limited (“the landlord”) and asked for assistance.  The defendants also requested the landlord to intervene in the matters.  On 21 February 2006, the landlord arranged a meeting including:  Mr Wong Yee-chow of the plaintiff; a number of stall licensees including the defendants; representative of the landlord; Legislative Council member, Mr Albert Chan, at Chan’s Tin Shui Wai office. 

7.  It is the defendants’ case, but denied by the plaintiff, that the plaintiff and the defendants had reached the new agreement in this negotiation meeting.

8.  It is the defendants’ case that the terms of the new agreement, inter alia, were that the defendants shall continue to rent their respective stalls and pay the old rent.  A re-assessment of the rent shall be carried out by the plaintiff to determine the new rate.  The plaintiff agreed not to take any further action, including claiming vacant possession, before the determination of the new rent.  The next negotiation meeting was scheduled on 22 March 2006.  The defendants are still paying the old rent to the plaintiff.

9.  The plaintiff subsequently issued six writs of summons on 22 March 2006, claiming against the defendants for, inter alia, vacant possession of the stalls, the licence fees and/or mesne profits at a new rate.  On 3 April 2006, the defendants acknowledged the service of the writ and stated their intention to defend.  On 27 April 2006, the plaintiff issued Order 14 summonses against the defendants.

The Plaintiff’s Case

10.  It is the plaintiff’s case that the licence agreements between the plaintiff, as the licensor on the one part, and the respective defendants, as the licensees on the other part, in respect of the respective stalls in the market had expired.  The plaintiff alleges that the parties could not reach any new agreement on the terms and conditions of the licence of the stalls and therefore the defendants should deliver vacant possession of the stalls to the plaintiff.  The plaintiff denies that any new agreement was reached on the negotiation meeting on 21 March 2006.  If any agreement was reached it was only an agreement to negotiate and therefore not a binding contract.

The Defendants’ Case

11.  It is the defendants’ case that there was a new agreement reached between the plaintiff and the defendants in the meeting on 21 February 2006.  The meeting was held at Legislative Council member, Mr Albert Chan’s office for 4½ hours with the attendance of: Mr Wong Yee-chow of the plaintiff; the defendants; Mr So Luk-ming (a representative from the Association of the Licensors); Mr Cheung Kin-fat (the general manager of the landlord); and a number of other licensees and volunteers.  The new agreement was evidenced in minutes prepared by one of the volunteers, and the affirmations of the defendants and some independent witnesses, including Legislative Council member Mr Chan.

12.  It was agreed, inter alia, that:

(1)   the defendants shall continue to rent their respective stalls and pay the old rent;

(2)   any agreement prior to the new agreement in respect of the new rate shall be superseded (and this would be applicable to the case of D2);

(3) the new rate shall be determined by the parties in the subsequent meetings.  The plaintiff shall carry out a re-assessment of the rent.  The new rent shall have retrospective effect from 16 February 2006;

(4)   the plaintiff shall carry out the re-assessment of the rate in accordance with four principles, namely: the operation costs; business environment; geographical location; and nature of the business, as suggested by Mr So Luk-ming;

(5)   the new agreement shall be reduced into writing and a new draft shall be provided to the defendants in the next meeting on 22 March 2006;

(6)   the plaintiff agree not to take any further action, including increasing the rent substantially and claiming vacant possession before the determination of the amount of the new rent.

13.  Pursuant to the new agreement, the defendants have provided the consideration by paying, and are still paying, the old rent.  On 22 March 2006, the plaintiff wrongfully repudiated the new agreement by taking out the present actions against the defendants. 

14.  In respect of D2, her case is that she signed the application form for renewal of the licence agreement under undue influence and was not given enough time for consideration.  It was only an application form and not a formal agreement.

15.  At the hearing in this morning, it was noticed that page 2 of the copy of the application form was missing, the plaintiff undertook to give me the missing page and I did receive a full set of the said application form after the hearing.  Without recalling counsel for both parties for further argument, I would simply make one observation.  Paragraph 6 (ii) at page 2 of the application form provides, in Chinese - and I provide my own translation - that:

“Before Party B, the licensee, signs the formal licence agreement, Party A, the licensor, is not bound by any clauses in this provisional licence agreement and it is entitled to rent the stall to other persons...... Party B has no right to sue Party A for any liability or damages.”

It appears to me that the “provisional licence agreement” is only an agreement “subject to contract”.

The Principles

16.  The principles applicable to Order 14 are well established.  It is well established that the defendants only need to show that there is an issue or question in dispute which ought to be tried.  In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155 at 158, the Court of Appeal held that:

“It will in future be sufficient for the court to ask itself the simple question:  is what the defendant says credible?  If so, he must have leave to defend.  If not, the plaintiff is entitled to summary judgment.  The issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable.”

17.  The Court of Appeal in Man Earn Limited v Wing Ting Fong [1996] 1 HKC 225 at 228 held that:

“Unless it is obvious that the defence put forward by the defendant is frivolous and practically moonshine, Order 14 ought not to be applied.”

Further, under Order 14, rule 3(1), an application for summary judgment may also be dismissed if the circumstances of the case afford some other reason for trial.  In particular, whenever there are circumstances which require close investigation there ought to be a trial and summary judgment should not be given.

The Dispute

18.  The main dispute between the parties is whether a new agreement was reached at the negotiation meeting held on 21 February 2006.  If there was an agreement, then what were the terms of the agreement?  And was the new agreement intended to create a legal relationship, so much so that parties are bound by the new agreement?  Or was the new agreement only an agreement to negotiate and that parties are not legally bound by it? 

19.  On the last question, the plaintiff’s argument is that the new agreement, if any, is not a contract because it is too uncertain.  The new agreement, at most, is an expression that the parties indicated their willingness to further negotiate for an agreement to be reached, if any.  And there was no further negotiation.

20.  It is trite law that an express agreement merely to negotiate is not a contract because it is too uncertain to have any binding force (see Chitty on Contracts, 29th edition, page 187, paragraph 2-134).  In Walford v Miles, a “lock-out” agreement collateral to negotiations for the sale of a business lacked sufficient certainty because it failed to specify the time during which the vendors were not to negotiate with third parties, and the House of Lords unanimously rejected the argument that a term should be implied requiring the vendors to continue to negotiate in good faith with the purchaser for so long as the vendors continued to decide to sell, since such a term was in itself too uncertain to be enforced.

21.  However, I agree with the defendants’ argument that Walford does not exclude the possibility that a different conclusion may be reached where the parties have reached agreement on all essential points, so as to show that they do intend to be legally bound by the agreement but have left other points open.  The court may then imply a term that they are to be negotiated in good faith so as to settle outstanding details which are to be incorporated in the formal document setting out the full terms of the contract between them (see Donwin Productions Limited v EMI Films Limited, The Times, March 9th 1984, not cited in Walford).

22.  On the other hand, an agreement may be complete although it is not worked out in meticulous detail.  Thus an agreement for the sale of goods may be complete as soon as the parties have agreed to buy and sell, where the remaining details can be determined by the standard of reasonableness or by law (see paragraph 2-111 at page 173 of Chitty on Contracts, 29th edition).

23.  Was there a new agreement?  The defendants’ case is that there was a new agreement reached between the defendants and Mr Wong on behalf of the plaintiff in the meeting.  It is evidenced in the minutes prepared by a volunteer.  The defendants and a number of people present at the meeting also affirmed the truth of a new agreement.  It is also the defendants’ case that the said minutes was sent to all people present at the meeting.  The plaintiff had never responded to the defendants nor raised any objections to the contents of the meetings.  In Mr Wong Yee-chow’s second affirmation he admitted that there was a meeting between the defendants and the plaintiff.  He did not take issue with the existence of the minutes but alleged that the minutes were unilaterally written by the pressure group.  He did not even dispute that there was discussion on the related aspects among the parties in the meeting.  He only denied that a new agreement was reached between the plaintiff and the defendants.  It is the first factual dispute to be decided by the court.

24.  I would pause here to make a remark that in the minutes of meeting, purportedly accurately recording the meeting which was videotaped, it did record at page 2 that an agreement was reached between Mr Wong of the plaintiff and the defendants present in the meeting with the terms consistent with the defendants’ case.  There was also a record of the dialogue between the parties in the meeting.   Mr Wong said, at page 4 second last entry:  “I agree with the above agreement”.

25.  The assertion of the defendants that there was a new agreement cannot be said to be incredible.  Whether there is an intention to create legal relationship and what are the terms of the new agreement are factual disputes.  Whether the new agreement is merely an agreement to negotiate is a mixed issue of fact and law. 

26.  I would pause here to make one observation.  The plaintiff says that the new agreement, if any, is too vague and lacks details for enforcement.  It appears to me that the terms of the new agreement as recorded in the minutes of the meeting are not so vague that no reasonable tribunal would have found it a legally binding agreement.  Even if the plaintiff’s argument is right, the date for the second negotiation meeting on rent scheduled on 22 March 2006 is quite clear and certain.  And assuming that there was the new agreement that the plaintiff before any further agreement must not take any actions, including repossession of the stalls, when the defendants had indicated their intention to continue to rent the stalls and did pay the old rent, it would be unconscionable for the plaintiff to issue the writs on 22 March 2006, when the second negotiation meeting was supposed to be held.

27.  In respect of D2, her claim that she was under undue influence in signing the provisional licence agreement is another factual dispute. 

28.  In my judgment, the above factual and legal disputes cannot be resolved without a full trial and hearing of oral evidence of witnesses.  The defendants have shown a reasonable defence, at least it cannot be regarded as frivolous or practically moonshine. 

Order

29.  The plaintiff’s application for summary judgment is therefore dismissed.  I will give all defendants unconditional leave to defend.  I will now hear counsel on the issue of costs.

(Discussion on costs)

30.  The defendants have succeeded in this application.  I see no special reasons in this case not to follow the usual rule.  I order the plaintiff to pay the defendants costs of this application in any event with certificate for counsel.