THE OBSERVER STAR PUBLISHING GROUP LTD AND ANOTHER v. YU KWOK CHOR

DCCJ4563/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4563 OF 2005

J U D G M E N T

1.  This is an application by the Plaintiffs for summary judgment against the Defendant in the amount of $580,000 and to strike out the counterclaim filed by the Defendant.

2.  By a service agreement dated 10 May 2004 made between the 1st Plaintiff and the Defendant (“the Service Agreement”), it was agreed that the Defendant shall serve as the chief executive officer of a newspaper, namely “The Observer Star” (“the Newsparper”), operated by the Plaintiffs’ group for a term of 3 years commencing on 1 June 2004.  Under the Service Agreement, the Defendant would receive a monthly service fee of $70,000.  The service fee for the first 12 months in the sum of $840,000 was paid by the 2nd Plaintiff, which was an associate company of the 1st Plaintiff in the same group of companies, to the Defendant upon the signing of the Service Agreement.  It was agreed that such advance payment would be used to set-off against the subsequent 36 months of service fee payable to the Defendant under the Service Agreement.  It was also agreed that either party would have the right to terminate the Service Agreement by giving six months’ written notice of termination.

3.  On 3 August 2004, the Defendant served a resignation notice on the 1st Plaintiff to terminate the Service Agreement on 3 February 2005.

4.  Subsequently, the parties signed a supplemental agreement dated 8 October 2005 (“the Supplemental Agreement”), whereby it was agreed that if the Defendant could generate advertising income totalling $1.2 million for the two newspapers, namely “Community Star” and the Newspaper, operated by the Plaintiffs’ group between September and November 2004, the Defendant would not be liable to repay the Plaintiffs the outstanding advance service fee which was calculated to be in the sum of $771,000 by that time.

5.  It is common ground that the Defendant failed to meet the set target for advertising income. By another agreement dated 28 December 2004 made between both Plaintiffs and the Defendant (“the December Agreement”), it was agreed that there be an early termination of the Service Agreement and the Supplemental Agreement on 30 November 2004, and the Defendant had to return to the 2nd Plaintiff the sum of $580,000, being the outstanding amount of the advance payment of service fee agreed by the 1st Plaintiff and the Defendant, by 10 instalments.  It was also agreed that if the Defendant failed to make any of the instalment payments, the 2nd Plaintiff should be entitled to recover from the Defendant the whole amount of the outstanding balance.

6.  The Defendant failed to make any of the instalment payments, and so the Plaintiffs brought the present action to recover the sum of $580,000 from the Defendant. 

7.  The Defendant is absent in the hearing.  However, from the contents of the Defence and Counterclaim and the affirmation in opposition, it seems that the Defendant is relying on the following three grounds of defence:

(1)   the Defendant was assured by one Mr Bruno Woo of the 1st Plaintiff, that the 1st Plaintiff would give absolute discretion and support to the Defendant to recruit and control the human resources to facilitate the daily operation of the Newspaper in order to meet the sales target.  However, soon after the Defendant took up the office, the 1st Plaintiff, in or about July 2004, laid off a number of sales staff of the Newspaper for the sake of costs reduction, and as a result the Defendant was unable to meet the sales target.  Hence, the Defendant claims that the 1st Plaintiff was in breach of the terms of the Service Agreement; 

(2)   the Defendant claims that the 1st Plaintiff has failed to pay the Defendant his service fee in the sum of $212,035.71 covering the period from August 2004 to 3 February 2005, and so the Defendant claims that the 1st Plaintiff has to account to him for such payment; and 

(3)  it is the Defendant’s case that he was entitled to keep the advance payment of $840,000 as it was the 1st Plaintiff who was in repudiatory breach of the Service Agreement, hence there was no consideration to support the December Agreement. 

8.  Obviously, the Plaintiffs dispute the factual allegations made by the Defendant.

9.  In my judgment, the defences put forward by the Defendant are all unarguable as they run contrary to the written terms of the December Agreement.  From the various written agreements made by the parties, it was clear that there were some discussions between the parties about the termination of the Service Agreement as the Defendant failed to meet the sales target.  After repeated discussions, the parties finally agreed for the amounts to be repaid by the Defendant, and the parties signed the December Agreement to confirm the same.  It is clear from the contents of the December Agreement that it was some kind of a settlement agreement superseding all previous complaints of the parties, and the December Agreement was intended by the parties to the full and final settlement of the dispute between them.  Indeed, if the Defendant wanted to pursue the claim for breach of the Service Agreement, why would the Defendant have signed the December Agreement confirming the amount due by him at that time?  The Defendant also handed 10 cheques to the Plaintiffs as some kind of security for the repayments, and this reinforces the fact that the parties intended the December Agreement to the final settlement between them.  Further, as the December Agreement was made after the discussions between the parties and the Defendant had the right to make the repayment by instalments, there was certainly consideration to support the December Agreement. 

10.  By reason of the aforesaid, the Defendant’s defences are all unarguable as they run contrary to the term of the December Agreement. As only the 2nd Plaintiff has the right to get back the repayment under the December Agreement, I grant summary judgment in favour of the 2nd Plaintiff for the amount claimed.  Further, there is clearly no merit in the counterclaim and I also strike out the same. 

11.  I now listen to the Plaintiffs’ submission on the issues of interest and of costs.