JUMBO KEY HOLDINGS LTD t/a THE CLEARWATER BAY EQUESTRIAN & EDUCATION CENTRE v. HONG KONG EQUESTRIAN CENTRE LTD

DCCJ4680/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4680 OF 2008

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D E C I S I O N

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1.  This is an application for summary judgment for the return and delivery up of 3 ponies.

2.  Silver Lining (Hong Kong) Limited (“Silver Lining”) was the owner of the 3 Ponies which are the subject matters of this action (“the 3 Ponies”).  According to the Defendant, the Defendant had a joint venture with Silver Lining in about July 2006 whereby Silver Lining would purchase six ponies, including the 3 Ponies involved in this case, and house the same in a stable provided by the Defendant, and the Defendant would be responsible for the maintenance of the ponies including feeding and keeping the ponies.  The ponies would be used for providing training courses to students and the net profits earned from the training courses would be shared between the Defendant and Silver Lining.

3.  It is common ground that the joint venture came to an end on 31 August 2007.

4.  After the end of the joint venture, the Defendant continued to retain the 3 Ponies and used them to provide training lessons.  There have been various discussions between the Defendant and Silver Lining concerning profits and certain disputed charges relating to the use and maintenance of the ponies, but no agreement has been reached between them. 

5.  By a written agreement dated 2 May 2008, Silver Lining sold the 3 Ponies to the Plaintiff at the price of $120,000.  By letters dated 11 June 2008 and 30 July 2008, the Plaintiff demanded Defendant to release the 3 Ponies to it.  In reply, the Defendant stated in the letter dated 21 August 2008 that it would only return the 3 Ponies to the Plaintiff after all the outstanding charges owed by Silver Lining were settled.  In the Defendant’s affidavit in opposition, the Defendant alleges that up to 19 December 2008, Silver Lining owed it a total sum of $320,183.40 including various alleged charges unrelated to the 3 Ponies. 

6.  In opposing the Plaintiff’s claim for the return of the 3 Ponies, the Defendant claims that it has a general lien over the 3 Ponies for the alleged unpaid charges owed by Silver Lining to the Defendant.  Further, Mr Fok, counsel for the Defendant, submits that the Defendant is entitled to retain the 3 Ponies because the Defendant is not certain whether the Plaintiff is the rightful owner of the 3 Ponies.

7.  To deal with the ownership issue, the Plaintiff produces a copy of the sale agreement that it has lawfully purchased the 3 Ponies from Silver Lining at the price of $120,000.  As the Defendant cannot produce any evidence to challenge the Plaintiff’s evidence in this regard, there is no triable issue that the Plaintiff is the rightful owner of the 3 Ponies.

8.  The Defendant also runs into difficulty in respect of the defence of lien.  In his submission, Mr Fok claims that the Defendant has enjoyed a right of general lien over the 3 Ponies for the unpaid charges owed by Silver Lining to the Defendant.  However, it is trite law that general liens are discouraged because they give special privileges as against other creditors and tend to upset the equitable distribution of assets on bankruptcy.  General lien can only exist: (i) as a common law right arising from general usage; or (ii) by express agreement (see: Halsbury’s Laws of England, 4th Edition, Volume 28, paragraph 516).  In the present case, the Defendant has simply failed to produce any evidence to support that the Defendant enjoys the right of general lien whether by reason of general usage or express contractual arrangement.

9.  Further, it is the Defendant’s case that the joint venture agreement between Silver Lining and Defendant ended on 31 August 2007 and the Defendant had the right to exercise the right of lien from that time onwards.  However, according to the breakdown prepared by the Defendant for the debt owed by Silver Lining (exhibited as “LYM-6” to the Second Affirmation of Mr Li Yuen Man), most of the charges allegedly owed by Silver Lining to the Defendant relate to the maintenance costs of the 3 Ponies after termination of the joint venture arrangement.  In such case, how could the Defendant exercise the right of lien to keep the 3 Ponies for the unpaid maintenance costs incurred by the Defendant in keeping the 3 Ponies during the time when the Defendant tried to exercise the right of lien?  This is a totally circular argument.  It is obvious that there must be a clear existing debt before the Defendant can exercise the right of lien, and it is not right for the bailee to wrongfully detain the goods and use the maintenance costs incurred during such period to justify the wrongful detention.

10.  Assuming that the Defendant had the right of lien over the 3 Ponies, it is also clear that the Defendant has lost such right because of the following reasons.

11.  Firstly, the Defendant had continued to use the 3 Ponies for training lessons during the time when it purported to exercise the right of lien over the 3 Ponies.  It has been held in authorities such as Cooke v Haddon  (1862) 3 F&F 229, Gurr v Cuthbert (1843) 12 LJ Ex 309 and Mulliner v Florence [1878] 3 QBD 484, that lien is a mere right of possession and so as soon as a party uses the goods in a manner inconsistent with his claim of lien, from that moment his lien ceases and the right of possession of the other party revives.  As the Defendant has continued to use the 3 Ponies to provide lessons for profit, this is clearly inconsistent with a claim for a lien.  Hence, even if the Defendant could claim any lien to the 3 Ponies, it must have lost such right by doing so.

12.  Secondly, lien is a form of security.  Hence, a person claiming a lien must either claim it for a definite amount, or give the owner particulars from which he himself can calculate the amount for which a lien is due (see: Albemarle Supply Company Limited v Hind & Company [1928] KB 307 and Singh v Thaper CA 28 July 1987).  It must be good law.  Without knowing the amount of the unpaid debt, there is simply no way for the owner to get back the goods by tendering the appropriate amount of the alleged debt.

13.  After the Plaintiff informed the Defendant that it became the owner of the 3 Ponies and demanded their return, all that was stated in Defendant’s letter dated 21 August 2008 was that it would only return the 3 Ponies after all the outstanding charges owed by Silver Lining were settled.  The Defendant had failed to make a claim for a definite amount or give the Plaintiff any particulars which would enable it to calculate the amount for which a lien was due.  The Defendant eventually produced a breakdown of the alleged unpaid charges in one of the affirmations filed in opposition (“LYM-6” of the Second Affirmation of Li Yuen Man), however it was simply too late and the Defendant is not entitled to assert any lien against the Plaintiff.

14.  By reason of the aforesaid, the Defendant has failed to show any defence to the Plaintiff’s claim for the return of the 3 Ponies and I therefore allow the Plaintiff’s application for summary judgment.

15.  I now listen to the parties’ submissions on the appropriate wording of the order and on the issue of costs.