Chung Yiu Sum t/a Hang Lung Medicine Co. v. Golden Force Investment Ltd.

CACV000236/1994

IN THE COURT OF APPEAL

1994, No. 236
(Civil)

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Coram: Hon. Nazareth, V.-P., Bokhary and Liu, JJ.A.

Date of hearing: 23 June 1995

Date of judgment: 23 June 1995

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J U D G M E N T

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Liu, J.A.:

1. Under a tenancy agreement dated 31 March 1992, the defendant became the plaintiff's tenant of ground floor shop premises in Pak Ling Building, Lockhart Road. By that tenancy agreement, the defendant was granted a term of 2 years from 29 February 1992 to 28 February 1994, both days inclusive, at the rental of $24,000 per month inclusive of rates and management fees.

2. Before the expiration of the 2-year term, the plaintiff caused to be served on the defendant a 6-month Notice of Termination pursuant to s.122 of the Landlord and Tenant (Consolidation) Ordinance. After service of the Notice of Termination, the plaintiff through its agent negotiated with the defendant with a view to granting to the defendant a new term of the same premises. The negotiation failed. Suffice it to say that in the main, the plaintiff's agent demanded an increase of rent initially to $36,000 but was finally content to accept $35,000 per month. There were other contacts on different proposals. The defendant did not find the proposed new rental agreeable but after the expiration of the 2-year tenancy agreement, he refused to vacate from the premises.

3. The plaintiff caused to be issued a writ for possession, which was followed by a summons against the defendant under Order 18 Rule 19 and Order 14 r1 RSC for striking out the defence on the usual grounds and for summary judgment. The summons came before Master Woolley who held in favour of the plaintiff. From the decision of Master Woolley, the defendant appealed to Mayo J who dismissed the appeal and affirmed the master's decision. From the determination of Mayo J, the defendant now appeals to this Court.

4. As advised by counsel for the defendant, Mr C.H. Chan, there are only two legal issues for our consideration: first, the validity of the said Notice of Termination and secondly, the suspension of that notice in the circumstances of and by parties' conduct in the negotiation.

5. In his first argument, Mr C.H. Chan of counsel directs the court's attention to the fact that the 6-month Notice of Termination expired on the last day of the 2-year term granted to the defendant. It is submitted that since the last day i.e. 28 February 1994 was also included as part of the 2-year term in the said tenancy agreement, the Notice of Termination served to expire before the end of the fixed term was a bad notice.

6. The Notice of Termination was to expire "on or before the expiry date", that is to say the expiry date of the 2-year term, but counsel seeks to argue that the 6-month Notice of Termination had expired before the 2-year fixed term came to an end. It is difficult to see how the Notice of Termination could be, as counsel maintains in his submission, an invalid notice. Even assuming that a Notice of Termination for the requisite statutory period of 6 months is envisaged by s.122 of the Landlord and Tenant (Consolidation) Ordinance to be ineffective if it should expire before the end of a fixed term or thereafter (Kwan Ngan v. Cheung Kwan Yuk [1964] HKLR 439 at p.442, per Mills-Oweas J and Cheng On v. Leung Me Mo Foreign Wine [1964] HKLR 455 at p.459, per Blair Kerr J), the language of the notice before us does not admit of the meaning sought to be ascribed to it by counsel for the defendant. The 6-month Notice of Termination dated 13 August 1993 reads:-

"Please note that the contractual term of your tenancy in respect of the above premises will expire on 28th February 1994. We hereby give you notice that you are required to quit and deliver up vacant possession of the above premises to us on or before the expiry date."

The first sentence connotes that the contractual tenancy would expire at mid-night 28 February 1994. That is precisely what the tenancy agreement provided. The following sentence referring to the same "expiry date" is susceptible of no other meaning than that of the fixed term expiring at mid-night on 28 February as indicated in the preceding sentence. Read as a whole, the 6-month Notice of Termination was clearly a request to the defendant for delivering up vacant possession at the time when the contractual tenancy expired at mid-night 28 February 1994. Counsel's first argument therefore fails.

7. Turning to the second issue raised on behalf of the defendant i.e. whether or not the negotiation in the circumstances had given rise to an implied suspension of the 6-month Notice of Termination. As I said, the parties negotiated with a view to granting a new term in favour of the defendant as it had been done in the past. During the negotiation, the defendant is said to have been constantly put off by the plaintiff's agent - "plaintiff always asked me to keep waiting". At one time, so it is alleged, the agent of the plaintiff advised "that if the Plaintiff landlord or her company finally (decided) not to renew, they (would) confirm it in writing or by another notice".

8. On the protracted negotiation and the various terms discussed between the parties, counsel for the defendant submits that the 6-month Notice of Termination had been impliedly suspended. Counsel argues that by the plaintiff's conduct, representations and/or encouragement, engaging the defendant in negotiation, the plaintiff had lulled the defendant into a false sense of security that the Notice of Termination would be suspended during negotiation. Counsel submits that it would not be equitable, in the circumstances, to allow the plaintiff to rely on the 6-month Notice of Termination. Counsel relies on Snell's Equity, 29th edn p.569:-

"The system of estoppel developed by equity to supplement the rather narrow rules of common law is based on the unconscionable or inequitable conduct of a party. It may be that such a party was seeking to do no more than enforce his legal rights (e.g. as to payment of rent, or to possession of his land), and yet he had been guilty of such conduct that equity would intervene to deny him his remedy and thus protect the other party."

9. Mr C.H. Chan also lays great stress on para. 3-103 of Chitty on Contracts, 27th edn, vol. 1 at p.238:-

" Whether detriment necessary. The equitable principle is sometimes said to be analogous to the doctrine of estoppel by representation. According to this analogy the principle would operate only in favour of a person who had suffered some 'detriment' in the sense in which that word is used in that branch of the law. A tenant who pays only half the agreed rent suffers no such 'detriment'; and although ingenious attempts have been made to find some other 'detriment' in the High Trees case, the better view is that 'detriment' of the kind required for the purpose of estoppel by representation is not an essential requirement of the operation of the equitable principle. This is the position under the rule in Hughes v. Metropolitan Ry. on which the High Trees case is based. All that is necessary is that the promisee should have acted in reliance on the promise, so that it would be inequitable to allow the promisor to act inconsistently with it. This requirement was satisfied on the facts of the High Trees case, no less than on those of Hughes v. Metropolitan Ry."

10. It is settled law that once a notice is served, it would continue to run even though the party serving the notice wishes to withdraw it or waive it. SeeWoodfall on Landlord and Tenant, vol. 1, current edition, p.17/100, para. 17.200. But in this appeal, we are concerned with Order 14 and Order 18 Rule 19 proceedings in which all the defendant needs to show is an arguable case. On the passages referred to by Mr C.H. Chan on behalf of the defendant, it would appear that the plaintiff could arguably be estopped from relying on the continued running of his Notice of Termination by the alleged unconscionable conduct or other inequitable circumstances. That said, it falls upon this court to consider whether or not the negotiation in the circumstances of this case could feed the legal contentions sought to be run by Mr C.H. Chan. In other words, whether there is a prima facie case that the negotiation in this case did bring about a suspension, by implication, of the 6-month Notice of Termination.

11. Counsel for the defendant also leans heavily on Thomas Hughes v. The Directors of the Metropolitan Railway Co. [1877]2 A.C. 439, in which after service of a notice to repair on the lessee, the lessee offered to the freeholder lessor an option to purchase the remainder of his leasehold interests. The parties entered into negotiation. At p.444, the invitation to the lessor was set out in the speech of Lord Cairns, LC. The lessee there invited the lessor to negotiate in these terms: "It occurs to us that the freeholder may be desirous of obtaining possession of the company's interests, which, as you know, is but a short one, and so we propose to defer commencing the repairs until we hear from you as to the probability of an arrangement such as we suggest." (Emphasis added.) At p.445, having recounted the fact that the freeholder entered upon a negotiation "saying nothing farther", Lord Cairns concluded: "Now, that being a letter which, as it appears to me, acceded to the suggestion that the repairs were to be deferred until it was ascertained whether an agreement could be made for the purchase, ...". On those facts, it was held by Lord Cairns as supported in the speeches of the other Law Lords that it was impossible to allow any part of the time in the notice to repair to be counted afterwards as against the lessee.

12. We do not have the same situation here. Negotiation spanning a period of time was entered into. The intimation of the plaintiff's agent that the defendant should passively wait for the new rental figure to emanate from the landlord was only part of the negotiation. The alleged assurance that if the plaintiff decided not to renew "they (would) confirm it in writing or by another notice" was a promise, so submits counsel, consistent with the implied suspension flowing from the negotiation. This alleged assurance provided, on the face of it, an option to the plaintiff to confirm its intention to continue to rely on its Notice of Termination by letters - in writing. The plaintiff did subsequently so confirm it. The plaintiff's solicitors wrote on 26 February 1994 to remind the defendant through his solicitors of the Notice of Termination, urging him to deliver up vacant possession on 28 February. In the same letter of 26 February 1994, solicitors for the plaintiff threatened the defendant through his solicitors with legal proceedings should he fail to vacate from the suit premises by 28 February 1994. In another letter dated 17 November 1993, the plaintiff's solicitors wrote to remind the defendant that the suit premises would be resumed at the expiration of the 2-year tenancy. On another date, 19 January 1994, the plaintiff's solicitors refuted the allegation that the Notice of Termination had in any way been suspended. Lastly, by a letter dated 18 February 1994, the plaintiff through its solicitors again warned the defendant that the premises would be taken over as scheduled.

13. The facts in this case including the correspondence do not come close to the situation in Thomas Hughes. The Notice of Termination was never suggested to be deferred and it was not deferred. Negotiation for a new term after service of a common law, contractual or statutory notice to quit is all too common a feature of our commercial life. Disruption of the running of a notice to quit should not lightly be inferred without cogent evidence. The evidence in this case falls far short of that from which a suspension of the notice of termination in question may be implied.

14. The intimation of the plaintiff's agent viz. the "plaintiff always asked me to keep waiting" was merely part of the discussion in the course of the negotiation. The defendant's allegation that the plaintiff through his agent "advised that if the Plaintiff landlord or her company finally (decided) not to renew, they (would) confirm it in writing or by another notice" is altogether vague. Read in its proper context, as I said, the plaintiff could "confirm in writing" its intention to continue to rely on the Notice of Termination and this, the plaintiff had, time and again, done by writing to the defendant that the suit premises would be re-possessed on 28 February 1994. The alleged vague promise is not something capable of lending any weight to the allegation that the said Notice of Termination had impliedly been suspended. Negotiation, without more, as that in this case does not have the effect of suspending the Notice of Termination. There is no substance in the defendant's criticism against the judge's decision in this further issue.

15. Both issues before us fail. I would dismiss the appeal and affirm the Order of the judge.

Bokhary, J.A.:

16. When he gave judgment against the tenant, the judge below said that he did so with regret.

17. I, too, recognize the difficulty which people often face when they have to move out of their homes or the premises in which they conduct business.

18. But I do not think that we can reverse what the judge felt bound to do. And I will give my reasons why quite briefly.

19. The tenancy expired on February 28, 1994. That is what the tenancy agreement provided. And it is the basis on which the notice of termination proceeded. Neither the agreement nor the notice said that that meant midnight on that date. They did not have to say that. It went without saying. In my judgment, it is plain and obvious that the notice is valid. Its effect was plainly and obviously to require possession immediately after midnight on February 28, 1994 unless, of course, the tenant chose to vacant the premises earlier.

20. So the appellant tenant fails on the first issue in this appeal, which is whether it is reasonably arguable that no valid notice of termination had been given.

21. That leaves the only other issue: which is whether it is reasonably arguable that the respondent landlord is estopped, by its conduct subsequent to the giving of the notice of termination, from relying on such notice as one terminating at midnight on February 28, 1994.

22. The argument offered on the tenant's behalf runs thus. There were negotiations during the currency of which the running of time under the notice was suspended because the impression which the landlord gave the tenant was, in effect, that the same would be suspended. The tenant had acted under that impression in such way as would result in unjust detriment to him if the landlord were now able to rely on the notice free from suspension. And if one deducted the period of alleged suspension from the period of notice, the latter would not have expired before the issuance of the writ.

23. In my judgment, the estoppel argument does not get off the ground. A fair reading of the evidence filed simply does not yield any viable foundation for the contention that the landlord had given the tenant the impression that the running of time under the notice was being suspended.

24. It is true that the threshold at the summary judgment stage is not a high one. But the suspension of the running of time under a notice like this is no small matter. Whatever one's human sympathy for a tenant may be, such a matter is not to be found save on cogent evidence. Here, there was no such evidence.

25. I, too, would dismiss this appeal.

Nazareth, V.-P.:

26. I agree with my Lords that the defendant's first point is not arguable. I also agree that the defendant's second point likewise is not arguable. The representations relied upon simply do not amount to the encouragement claimed. There is no detriment to sustain equitable estoppel that I can see. Finally, the representations themselves that the defendant claims Miss Li made, cannot be regarded as credible even in the attenuated way that is required at this Order 14 stage. One cannot but feel sympathy for the defendant whose very modest shop will be driven out of business by soaring rents. But sympathy is no answer to the law and principles that clearly apply.

27. I also would dismiss the appeal.

Representation:

Mr C.H. Chan (M/s. Chan & Kong) for the appellant/defendant

Mr Edward Chan, Q.C. of Mr M. Liu (M/s. Siao, Wen & Leung) for the respondent/plaintiff