MARINER INTERNATIONAL HOTELS LTD AND ANOTHER v. ATLAS LTD AND ANOTHER

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2407 OF 1998

-----------------

-----------------

-----------------

JUDGMENT

-----------------

1. This is the hearing of the Plaintiff's Originating Summons under Order 29 Rule 7A for various relief as set out in the Originating Summons.

2. Before I deal with the merits, I would like to say a few words about the procedure adopted.

3. In this case, the Plaintiff has issued an Originating Summons in a form that is not provided for under the mandatory provisions of Order 7 Rule 2 and for which the Plaintiff obtained ex parte, an abridgment of time for the Acknowledgment of Service but without any similar orders for abridging the time for the filing of evidence by the Defendants. There has also not been any call over as is the practice with Originating Summonses under the Practice Directions.

4. This has led to the Defendant filing its first affidavit one day before the hearing, the Plaintiffs presenting a draft form of affidavit in reply just before the Defendants' counsel started his submissions, and the Defendants filing further evidence in reply to the Plaintiffs' affirmation in reply on the basis that the Defendants' time for filing its evidence under Order 28 has not yet elapsed.

5. That is obviously an undesirable state of affairs. I would, therefore, like to set out my views on the procedure to be adopted in cases of this nature of which, I am informed, there are very few.

6. In my view, the correct procedure to be adopted for an urgent application under Order 29 Rule 7A is for the Plaintiff to issue an Originating Summons in the general form. And if it can satisfy the court that the matter is urgent, to obtain abridgments of time, both for the Acknowledgment of Service and for the filing of evidence. In this respect, as to the matters of which the court must be satisfied before granting abridgments of time, I would adopt with respect the observations of Waung, J. in Talent Hope Limited v. Magnificent Estates Limited [1995] 3 HKC 593. I would only add that whilst an application for an abridgment of time for Acknowledgment of Service may, in an appropriate case, be made ex parte, the court would expect to hear the Defendant in any application regarding abridgments of time for the filing of evidence. This would enable the court to set a time-table that would be fair to both parties, and to enable the court to use its time efficiently.

7. But be that as it may, Stone J. had given an abridgment of time in this case to acknowledge service of the Originating Summons, and the Defendants have waived any irregularity both in the form and the contents of the Originating Summons by filing evidence on the merits of the case. So much for the procedure, I shall now come to the merits of this case.

8. Here, an agreement was made for the sale by the 1st Defendant to the 1st Plaintiff of shares of a company which in turn owned a company which owned a hotel under construction to be known as the Golden Bridge Hotel. The 2nd Defendant and the 2nd Plaintiff are the respective guarantors of the contractual obligations of the 1st Defendant and the 1st Plaintiff. The date for completion of this agreement subject to conditions precedent is 30th June 1998. There is a provision that time is to be of the essence. The Plaintiff's application here arises from its wish to inspect the Grand Plaza Hotel and the Golden Bridge Hotel and to have operational testing of various systems of the Golden Bridge Hotel.

9. Although it is not clear to me whether Mr. Tong, S.C. for the Plaintiffs, is saying that there is or is not a dispute between the parties on foot now as to any breaches of contract and the nature and effect of any such breaches, it is at least clear from the evidence filed in court that the parties are not on co-operative terms, and that questions may arise regarding the property, that is the Golden Bridge Hotel, which may become the subject matter of subsequent proceedings. Accordingly, I find that a case has been made out for an application under Order 29 Rule 7A(1).

10. The first issue before me is whether the right parties are before the court. Mr. Huggins for the Defendants submits that the Grand Plaza Hotel is owned by Tegraton and the Golden Bridge Hotel by Ocean Time Investments and they should have been joined as parties. Mr. Tong submits that Order 29 rule 7A is in very wide terms; it is not restricted to parties who are in possession of property and he submits that it is sufficient if parties have control over the properties in question. I appreciate the distinction between Section 42 and Section 44 of the Supreme Court Ordinance. In Section 42, there is an express reference to possession, custody or power of documents; in Section 44, there is none and in Rule 7A(2), there is a reference to possession and in Rule 7A(1), there is none.

11. In my judgment, the court should look at the reality of the situation and not at technicalities. In reality, the evidence is, that the Defendants are able to procure the Golden Bridge Hotel and the Grand Plaza Hotel to be inspected. Mr. Yuen, for the Defendants in paragraph 16 of his affirmation of 4th June, has said as much. Clearly, therefore, any orders the court would make as to the inspection of both hotels as against these Defendants would not be a mere exercise in futility. Therefore, I find that the application does not fail by reason of the non-joinder of the owners of the Grand Plaza Hotel and the Golden Bridge Hotel.

12. Then, I ask myself what are the issues between the parties. The first is in relation to inspection of the service apartment rooms and the hotel lobby of the Grand Plaza Hotel. Mr. Huggins accepts that the Plaintiffs are entitled to inspection of the service apartment rooms as renovated in December 1996 and the hotel lobby of the Grand Plaza Hotel. The question is when such inspection should take place. Mr. Huggins accepts that there can be an inspection immediately prior to completion of the agreement which is scheduled for 30th June 1998 subject, of course, to the conditions precedent. Although Mr. Huggins accepts that a reasonable time should be given, Mr. Tong submits that that it should be within enough time for experts to first inspect the Grand Plaza Hotel and make a report, and then secondly, to inspect the Golden Bridge Hotel and to make a report. Paragraph 4 of the Originating Summons asks for inspection first of the Grand Plaza Hotel within 7 days of the Order, which would make it 17th June and then a further 7 days, that is 24th June, for the Golden Bridge Hotel, which would give just enough time for the Plaintiffs to consider their position vis-a-vis the completion on 30th June. I am therefore prepared to accede to the Plaintiffs' application for inspection of the service apartment rooms and the lobby of the Grand Plaza Hotel within 7 days of today.

13. I then come to other parts of the Grand Plaza Hotel which the Plaintiffs seek under paragraphs 3(a)(iii) through to 3(a)(ix) of the Originating Summons. The reference to the Grand Plaza Hotel in relation to the Golden Bridge Hotel comes in in this way. In clause 2.01(b) of the present agreement, completion of the agreement is conditional upon and I read:

"The Vendor having procured the practical completion of the [Golden Bridge] Hotel with furniture, fixtures, fittings and decoration (the Hotel rooms shall be equivalent to the standard and quality of finishes of the Grand Plaza Hotel rooms as renovated in December 1996 and the main lobby of the Hotel shall be equivalent to the standard and quality of finishes of the existing Grand Plaza Hotel main lobby) and having obtained (1) the occupation permit in respect of the Hotel issued by the Building Authority and the Certificate of Compliance and (2) the licence in respect of the Hotel granted by the Office of the Licencing Authority of Home Affairs or the Hotel and Guesthouse Accommodation Authority Department under section 8(2)(a) of the Hotel and Guesthouse Accommodation Ordinance (or any other equivalent licence permitting the commencement of operation of the Hotel) ("The Hotel Licence") in order for the Hotel to commence business on or immediately after Completion."

14. The Plaintiff argues that this has made the Grand Plaza Hotel the "measuring standard" for the Golden Bridge Hotel. In fact, the only express reference to the Grand Plaza Hotel was with reference to its rooms and its hotel lobby. Mr. Tong for the Plaintiffs argues that the back of house and other sreas must by necessary implication be included as one would expect other parts of the hotel to be commensurate with the rooms and the lobby.

15. In my judgment, the Plaintiffs are not entitled to inspect other parts of the Grand Plaza Hotel to set the standard for the Golden Bridge Hotel. If the parties had intended that the Golden Bridge Hotel was to be constructed to the same standard as the Grand Plaza Hotel, not limited to the hotel rooms and the lobby, the parties could easily have agreed to that. Instead, what the parties specifically agreed was that only two specific parts of the hotel of peculiar interest to guests, namely the hotel rooms and the hotel lobby, were to be of the same standard as the Grand Plaza Hotel and indeed, in case of the rooms, as at December 1996. The only reasonable implication, in my judgment, is that other parts of the hotel were not required to be of the same standard as those other parts of the Grand Plaza Hotel.

16. As to Mr. Tong's argument, that the rest of the Golden Bridge Hotel must be of a commensurate standard as its rooms and lobby in view of the definition of hotel in Clause 1.02, that is a matter that can be considered within the parameters of the Golden Bridge Hotel only, and without necessitating an inspection of those other parts of the Grand Plaza Hotel. Accordingly, I refuse that part of the Originating Summons that seeks inspection of parts of the Grand Plaza Hotel other than its rooms and the lobby.

17. I then come to the inspection of the Golden Bridge Hotel. Mr. Huggins accepts that the Plaintiffs can inspect other areas of the Golden Bridge Hotel than its rooms and lobby. But he says that there is no reason to allow forms of recording at such inspection, such as still photography or video photography. Indeed, the photographing of the Golden Bridge Hotel has not been specifically sought in the Originating Summons. I note that Section 44 of the High Court Ordinance does permit photographing of property to be made. I would give leave to Mr. Tong to amend the Originating Summons to add photographing whether by still or video cameras. I do not see any difference between a written record made by the persons inspecting and a record made by means of still photography or video photography. If anything, the latter would be of greater help to the court if the matter were to come up in subsequent proceedings.

18. Then I come to the part of the Originating Summons which deals with operational testing of various systems of the Golden Bridge Hotel. This is now restricted to

19. Clause 6.03 of the agreement provides and I read as follows:

"The Vendor will arrange or procure Ocean to authorize the project manager involved in the construction of the hotel to liaise with an appointee of the Purchaser in regard to the construction and the installation of the fixture furniture and fittings of the Hotel in particular with regard to the laying of various cable and conduits for installation of the computer system by the Purchaser, and the Vendor and/or Ocean shall allow reasonable access of such appointee to the Property from time to time (by reasonable prior appointment) so as to enable such appointee to appraise the progress of the construction of the Hotel, Provided that the costs and expenses incurred by the Vendor and/or the project manager in connection with the above arrangement shall be borne and paid by the Purchaser."

20. In my judgment, I do not see how certain fixtures such as the air-conditioning system, the water heating system and so on, can be appraised by a simple visual inspection. In my view, for there to be any meaningful appraisal (in the true sense of that word) of progress of construction of the hotel, the operational testing aspect has to be included. In case this matter goes further, I would also record that I do not consider that there should be implied any term under clause 2.01 as submitted by Mr. Tong which he says would permit such inspection.

21. Since I have based my decision in this regard only under Clause 6.03, such inspection and operational testing could only be attended by an appointee under Clause 6.03. In other words, persons in the employ of the Plaintiffs' appointee Jones Lang Wotton. I would also for the record note that Mr. Tong is not asking in this Originating Summons for discovery or disclosure of any up-dated plans.

22. I will now deal with the actual terms of the order but before I do so, I would like to hear Mr. Huggins as to whether he wants any security under the terms of Order 29 Rule 7A.