XCHRX PLEASURE VIEW INVESTMENT LTD. v. CENTIFORD LTD. AND ANOTHER

HCA13905/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.13905 OF 1999

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J U D G M E N T

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1. This is an appeal by the defendants from the order of the master whereby the master ordered that conditional leave to defend be given to the defendants by the defendants paying into court, within the time stipulated, the sum of $527,419.35. The way that the master had arrived at that sum of $527,419.35 is, as I understand it, by coming to the view that the Defence of the defendants as to the reduced rent of $150,000 agreed to commence from 1 June 1998 is somewhat shadowy.

2. The relationship between the plaintiff and the defendants is that of a landlord and tenant under a tenancy agreement whereby the plaintiff, as landlord, let the premises as a cinema to the 1st defendant. The 2nd defendant, Mr Yeung, is the guarantor of the 1st defendant's obligation to the landlord.

3. The rent, originally under the agreement - and it is a long term agreement - is supposed to start at $340,000. There is, however, the undisputed evidence of a revised agreement whereby the rental was agreed to be reduced as a result of the downturn of the market to $200,000. The master had accepted this aspect of the Defence and this is not the subject of any appeal.

4. What was not accepted by the master is the second Defence of the defendants whereby the defendants alleged that there was an oral agreement, shortly before June 1998, whereby the representatives of the plaintiff agreed to a further reduction from $200,000 to $150,000 and that pursuant to that oral agreement, the defendants started paying $150,000. The table at page 114 of the Bundle clearly shows that that was what happened : $150,000 per month of rent was paid every month starting from June 1998. The plaintiff disputed this oral agreement.

5. There is also a dispute as to the receipt issued by the plaintiff where the $200,000 was crossed out and replaced by the words "$150,000". The defendants say that the manuscript correction came from the plaintiff. The plaintiff denies this.

6. It seems to me that the circumstances point to the strong possibility that there was such an oral agreement. There were certainly nothing contemporaneous or undisputed contemporaneous evidence to show that the plaintiff disputed the payment of $150,000 and required the full payment of $200,000. There is no dispute that the defendants continued to pay $150,000 a month. It would seem to me inconceivable that if there had not been some sort of agreement, that the defendants would just unilaterally pay $150,000 rather than the $200,000 revised rent agreed.

7. I certainly take the view that there is more than enough scope in this case for that oral agreement to be the subject of the unconditional leave to defend. In my view, the master was wrong to make the order of conditional leave by ordering the payment in of the $500,000 odd. In fact, it seems to me also wrong, in any event, for the master to order the judgment of the full sum in the event of the defendants failing to make payment into court of the $500,000 odd. Having come to the view that the $200,000 defence is good, it seems to me that at least the master ought to have ordered a conditional leave to defend only limited to the portion as to the $150,000 dispute. But having arrived at the conclusion that conditional leave to defend should not have been ordered, it seems to me that the second error of the master would have made no difference to the result today.

8. I therefore order that the defendants be given unconditional leave to defend. There had been some steps taken, after the order of the master was made, namely that there was judgment entered because the stay application of the defendants was heard but not dealt with in time. The judgment that had been entered against the defendants should be set aside and the defendants be given unconditional leave to defend.

9. I also order that costs below be costs in the cause, and costs of the appeal be to the defendants in any event.