Crown Well International Ltd v. Billion Ace Ltd and Another

DCCJ 1898/2021

[2025] HKDC 132

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1898 OF 2021

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BETWEEN

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JUDGMENT

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Introduction

1.This is the judgment after trial of a landlord and tenant dispute. The premises concerned is 17/F, Circle Tower, 28 Tang Lung Street, Hong Kong (“the Property”). The parties of the action are:

(1) the Plaintiff, Crown Well International Limited (“P”), the registered owner and landlord of the Property;

(2) the 1^st Defendant, Billion Ace Limited (“D1”), the tenant of the Property under a Tenancy Agreement dated 1.8.2018 (“the Tenancy Agreement”), which terms provide for the period of two years commencing on 16.7.2018 and expiring on 15.7.2020. Immediately prior to that, the tenant of the Property was Golden Diamond Trading Limited (“Golden Diamond”);

(3) the 2^nd Defendant, Kwok Janet Pei Kiong (“D2”), the sole director and shareholder of both D1 and Golden Diamond at all material times. D2 unconditionally guaranteed D1’s performance of the Tenancy Agreement under a Deed of Guarantee also dated 1.8.2018 (“the Guarantee”) (D1 and D2 collectively, “Ds”).

2.Ds ran a restaurant business at the Property at the material time. For the purposes of such business, D1 held a general restaurant licence (“the General Restaurant Licence”), and had certain restaurant fixtures and/or machineries.

3.Under the Tenancy Agreement:

(1) The original tenancy period runs until 15.7.2020, which D1 is liable to pay full rent for;

(2) A rental deposit of HK$307,261.20 was paid by D1 to P (“the Deposit”) to secure due observance and performance by D1 of the Tenancy Agreement, and which P may forfeit or deduct from the amount of any costs, expenses, loss or damage sustained by P as the result of any non-observance or non-performance by D1 of the Tenancy Agreement;

(3) Under Clause 2(au), D1 agreed inter alia at the expiration or sooner determination of this tenancy to deliver up to P vacant possession of, and to reinstate the Property in, “bare shell condition” or as directed by P together with P’s fixtures and fittings and decorations as provided in such good clean and tenantable repair and condition, provided that D1’s obligations relating to removal or reinstatement may be modified or varied by P notifying D1 in writing.

4.The core of the dispute between parties is whether through communication, and correspondences and/or actions, there had been any variation and/or estoppel of the Tenancy Agreement, such that:

(1) D1 (and thereby D2’s liability as guarantor) had been released and/or discharged from the Tenancy Agreement earlier than its original end date of 15.7.2020; and/or

(2) P has waived and/or varied the “bare-shell condition” requirement under the Tenancy Agreement.

Parties’ Pleaded Case

5.P in its Statement of Claim (“SOC”) says the Tenancy Agreement, without variation and/or estoppel, was fully effective and binding amongst parties. Relying on the full term of the Tenancy Agreement, P claims for:

(1) Arrears of Rents in the sum of HK$604,064.52, representing the unpaid rent from December 2019 to 15.7.2020, plus interest;

(2) Arrears of Rates, Management Fee, Admin & Water Sewage Charge in the sum of HK$104,434.26, representing such unpaid fees covering until 15.7.2020, plus interest;

(3) Damages for breach of Tenancy Agreement in the amount of:

(a) HK$11,483.87, being rent for the rent-free period which D1 is not being entitled to if it failed to perform the terms and conditions of the Tenancy Agreement through the term of the tenancy;

(b) HK$169,430, being the costs of reinstatement of the Property, for D1’s breach of Clause 2(au) of the Tenancy Agreement in failing to deliver up the Property to P in “bare shell condition”.

6.Ds, initially represented by So, Ho & Co, filed a joint Defence and Counterclaim on 4 August 2021 (“DCC”). However, D1 applied for deregistration on 24.6.2020, have since been deregistered from the Companies Registry on 27.1.2021 and was dissolved on 2.7.2021. Leave was granted to P to discontinue its action against D1.

7.In answer to P’s claim, D2 in her Amended Defence and Counterclaim (“ADEF[1]”) pleaded a case of Early Termination Agreement, and/or estoppel based on reliance and performance by D1 of the Early Termination Agreement[2].

8.D2 pleaded that such Early Termination Agreement was “pursuant to an oral agreement made between P and D1 at a meeting and/or meetings on or about 12 to 14.3.2020”, with terms of the Early Termination Agreement in gist as follows:

(1) The Tenancy Agreement would be terminated on 31.3.2020;

(2) The liability of D1 up to 31.3.2020 was in the sum of HK457,835.65. The rental deposit in the sum of HK$307,261.20 would be retained by P to offset the liability (“the Rental Deposit”). Despite there being a further outstanding amount of HK$150,574.45 (after offsetting the Rental Deposit), D1 shall pay a further sum of HK$62,000 as full and final settlement of all liability accrued under the Tenancy Agreement and for payments up to 31.3.2020. In other words, the difference of HK$91,915.76 which was owed is according to Ds’ pleaded case to be treated as settled.

(3) D1 shall leave behind all furniture and fixtures in the Property for P’s use save and except (i) those to be specified in “the 1^st and 2^nd Reinstatement Specifications” and (ii) an ice making machine, a dishwasher, and a BBQ griller.

(4) In consideration of the above, P waived all rights to pursue against D1 for arrears accrued under the Tenancy Agreement.

9.It is noted that:

(1) According D2, the Early Termination Agreement does not require the actual reinstatement of the Property in accordance with the 1^st and 2^nd Reinstatement Specifications. What was required of D1 was (i) retention of the Rental Deposit; (ii) payment of HK$62,000; (iii) leaving behind of certain furniture/fixtures that was/to be specified.

(2) D2 in the ADEF defined the reinstatement specifications sent by P to D1 on 16.3.2020 as “the 1^st Revised Reinstatement Specifications”, and that sent on 23.3.2020 as “the 2^nd Revised Reinstatement Specifications”. The “original” reinstatement specifications” were said to be a set provided by Mr. Derek Chan (“Derek”) to D2 “during the Meeting” but without specifying when this was between 12.3.2020 to 14.3.2020[3]. However, the Early Termination Agreement on pleadings refer to the 1^st and 2^nd Reinstatement Specifications without the word “Revised”[4].

(3) I shall refer to the reinstatement specifications sent by P to D1 on 16.3.2020 by email as “the 16.3.2020 Specification”; and the reinstatement specifications sent by P to D1 on 23.3.2020 by email as “the 23.3.2020 Specification”.

10.Regarding D2’s case on whether D1 “performed the obligations under the Early Termination Agreement”[5]:

(1) The 16.3.2020 Specification and the 23.3.2020 Specification were sent by P to D1 which required the reinstatement to be completed on 26.3.2020.

(2) D1 “endeavored to comply with the same” but was unable to complete the reinstatement by 31.3.2020 “by reason of short notice”. D1 completed the same on 6.4.2020 “except a few items (mainly in the toilets), which remained the same as they had been before D1 took possession of the Property”. As such, on D2’s pleaded case, D1 never fully complied with P’s reinstatement specifications[6], be it in terms of scope of reinstatement or timing.

(3) From 12.3.2020 to 6.4.2020, representative of P inspected the Property and communicated with the contractor appointed by D1, and “never expressed to [D2/Ms. Jacqueline Wong (D2’s assistant, “Jackie”)] that P was not satisfied with the reinstatement work.”.

(4) On or about 6.4.2020, D1 surrendered the Property and delivered the key to P’s agent, Jones Lang Lasalle Management Services Ltd (“JLL”). Ds have not since been allowed access to the Property.

(5) D2 says that[7] by (i) payment of HK$62,000; (ii) D1 endeavouring to perform reinstatement work to comply with the 16.3.2020 Specification and 23.3.2020 Specification, and P not expressing dissatisfaction of the same; (iii) surrendering the Property by delivering the keys to JLL on or about 6 April 2020, D2 has “performed the obligations under the Early Termination Agreement”.

(6) D1 did not later execute a written surrender agreement with P because D2 noted that P unilaterally added extra items to the draft agreement, including extra payment obligation for the sum of HK$91,915.76 and a transfer of the General Restaurant Licence from D1 to P.

11.P in its Amended Reply (“AREP”) denies D2’s case of the Early Termination Agreement and/or estoppel and pleads that:

(1) At the meeting on 12.3.2020 (“the 12.3.2020 Meeting”), Ds requested for termination of the Tenancy Agreement on 31 March 2020, but the terms proposed by Ds were not those under the Early Termination Agreement. D2 issued a cheque in the sum of HK$62,000 to P in partial settlement of D1’s outstanding rent of December 2019 to avoid further interest accrual, as suggested by one Ms Ivy Chiang (who appears to be D2’s friend) (“Ivy”).

(2) The terms proposed by Ds at the 12.3.2020 Meeting were as follows. For convenience, such terms shall be referred to as “March Proposed Terms”[8]:

(a) D1 shall surrender and deliver vacant possession of the Property on or before 31.3.2020;

(b) The Rental Deposit shall be applied to settle the outstanding charges and/or rent arrears etc. D1 shall settle the outstanding amount in the sum of HK$91,915.76 on or before 31.3.2020;

(c) D1 shall transfer the General Restaurant Licence to P (or its nominees) in respect of the Property within 3 months, with fees occasioned/incidental thereto be shared between P and D1 equally;

(d) The related fittings and cooking appliances in relation to the General Restaurant Licence shall remain in the Property to facilitate successful transfer of the General Restaurant Licence to P. Save and except such, D1 shall reinstate the Property in accordance with P’s standard requirements and deliver up the Property not later than 31.3.2020.

(3) At the 12.3.2020 Meeting, P’s representatives said the March Proposed Terms shall be subject to approval of P’s Leasing Committee, and the Tenancy Agreement remained prevailing and in full force and effect.

(4) On 14.3.2020, D2 and Jackie went to P’s office without prior appointment and asked whether P had approved the March Proposed Terms. P’s representative said the P’s Leasing Committee had not yet approved or confirmed the March Proposed Terms.

(5) The 16.3.2020 Specification and 23.3.2020 Specification were provided for the purposes of the March Proposed Terms and the surrender agreement intended to be signed (but eventually not signed by D1) by 31.3.2020.

(6) On 31.3.2020, P’s then legal representative sent a draft surrender agreement to Ds which incorporated the March Proposed Terms (“the Draft Surrender Agreement”). However, Ds failed to execute nor comply with the same. As such, Ds are liable to reinstate the Property in accordance with the terms of the Tenancy Agreement ie in bare-shell condition.

(7) Ds were free to access the Property before 15.7.2020. On 15.5.2020, Ds through solicitors by letter[9] requested to surrender the Property to P. Ds were aware the Tenancy Agreement was still in force.

(8) The keys to the Property were left to JLL, being management company of the Property, to facilitate workmen gaining access for reinstatement work. The keys were only returned by D2 to P on 15.7.2020.

Highlighted subsequent correspondences/events

12.Subsequent to the meeting(s) in March 2020 were the following indisputable correspondences between parties, which I highlight for better context to the factual matrix.

13.On 13.3.2020, Jackie sent a letter to P, referring to the meeting on 12.3.2020, which as relevant reads:

“During the meeting, you indicated the requirement to reinstate the premise to its original state subject to a request to retain certain renovations…. You were to provide a list of such requirements…so that both parties could be clear on specifics of reinstating work to be performed. We are still awaiting for this information (in English and Chinese, preferably with photos) so that contractor team can begin their work…. Secondly, [D2] provided a personal cheque which you acknowledged receipt in the amount of HKD62,000, in good faith, as a reasonable offer for settlement of the outstanding balance proposed by your Leasing Committee. We trust that the Leasing Committee has been, or will shortly be, apprised of the rationale for such offer and we look forward to receiving a favourable response.” [Emphasis added]

14.On 15.3.2020 and 16.3.2020, P sent debit note and a “2^nd Reminder” for the outstanding rental, fees and interest etc. totalling $496,172.90 (including rental for April 2020). Compared to the “1^st Reminder” dated 8.1.2020, the amount due under the item “Rental-01/12/2019-31/12/2019” was deducted from HK$89,000.00 in the 1^st Reminder to HK$27,000.00 in the 2^nd Reminder, the difference being HK$62,000 ie the same amount as the cheque issued by D2 to P at the 12.3.2020.

15.In the latter half of March 2020, parties exchanged email correspondences^[10] mentioning the Cheque, the topic of reinstatement, the Tenancy Agreement and settlement of outstanding balance.

16.There is no dispute that Derek sent to Ds the 16.3.2020 Specification and 23.3.2020 Specification, which required completion of reinstatement by 26.3.2020. There is also no dispute that requirements were not in fact completed by 26.3.2020.^[11]

17.On 17.3.2020, Jackie again by email wrote to P, stating that Ds “trust that the Leasing Committee is being apprised of the rationale and good faith made… Hence, we look forward to receiving a favourable response shortly.” On its face it appears Jackie knew no agreement were reached, as such were subject to P’s Leasing Committee’s approval.

18.What then followed was a series of lawyers’ correspondences (“the Lawyers’ Correspondences”), some of which marked without prejudice and referred to in P’s pleadings. There is no dispute of the authenticity thereof. Before trial, these letters were included in the hearing bundle by agreement without dispute on admissibility. By closing, however, counsel for D2 argued for the first time against the admissibility and/or use of the same. For reasons explained below, I reject D2’s argument. The gist of such lawyers’ communications were as follows.

19.On 31.3.2020, P’s solicitors at the time Joseph C T Lee & Co sent to D2 an email referring to previous communications, attaching the Draft Surrender Agreement, asking D2 to attend P’s office to sign the same, and asking D2 to bring a cheque in the sum of HK$91,915.76 drawn in favour of P. P in its AREP referred to this letter. The Draft Surrender Agreement included the March Proposed Terms, and attached a schedule setting out the various arrears owed by D1 to P to the amount of HK$91,915.765 (“the First Schedule”) which shall be paid on or before 31.3.2020. The Draft Surrender Agreement was not signed on 31.3.2020. On the same date, Joseph C T Lee & Co for P sent another letter to Ds stating that as Ds could not come to their office to sign the Draft Surrender Agreement and provide the cheque in the sum of HK$91,915.76 as requested, the Tenancy Agreement shall continue in full force.

20.On 20.4.2020, Hon & Co on behalf of Ds sent a letter marked without prejudice to Joseph C T Lee without mentioning any prior oral agreement. It was stated that:

(1) Parties on 12.3.2020 and 14.3.2020 had meetings to discuss matters in respect of surrender of the Property and reinstatement works to be done.

(2) Reinstatement specifications were sent by Derek to D2 on 23.3.2020, which, given (i) short notice, D2 shall not carry out, and (ii) D1 did not modify the toilet as alleged by P and reinstatement requested by P shall not be performed. They enclosed a revised version of the 23.3.2020 Specification.

(3) D2 was willing to offer a lump sum of HK$20,000 in full and final settlement of P’s claims after set-off of the Deposit.

(4) The Draft Surrender Agreement as engrossed by Hon & Co was attached for P’s consideration. Such engrossment included:

(a) Amending the surrender date to 24.4.2020.

(b) Amending the payment of outstanding sum from HK$91,915.76 to HK$20,000.

(c) Keeping D1’s transfer of the General Restaurant Licence to P, but deleting the requirement for the fees for such transfer to be shared and/or consequences of indemnity to P of HK$50,000 as compensation if such transfer fails.

(d) Crossing out the First Schedule.

(e) Partially amending the specification requirements attached to the Draft Surrender Agreement, including on the deadline for completion to 25.4.2020 (from the original 26.3.2020) and on some of the items concerned.

21.On 23.4.2020, Joseph C T Lee & Co for P wrote by without prejudice letter to Hon & Co for Ds, stating that since the terms of the Draft Surrender Agreement could not be agreed, the terms of the Tenancy Agreement and the Guarantee continue to be effective, and P will not accept any surrender of the Tenancy Agreement until all the terms of the surrender agreement are agreed by P. Ds were also asked to continue to pay monthly rentals.

22.On 27.4.2020, Hon & Co for Ds wrote by without prejudice letter to Joseph C T Lee & Co, engrossing on the terms for surrender, amending certain outstanding fees, and offering HK$50,000 as full and final settlement of P’s claims.

23.On 15.5.2020, So, Ho & Co solicitors on behalf of Ds wrote to P by without prejudice letter, stating they replaced Hon & Co in acting for Ds who would like to surrender the Property to P, and asked for a draft Surrender Agreement for their approval. Again, no prior oral agreement was mentioned.

24.On 15.6.2020, Joseph C T Lee & Co wrote to So, Ho & Co, referring to earlier negotiations in March 2020, the Draft Surrender Agreement which remained unsigned, and the latter correspondences in April. It was further stated that the Tenancy Agreement expires on 15.7.2020, full payment of all rents and arrears until 15.7.2020 and vacant possession of the Property in “bare-shell” condition is required, and providing quotations for reinstatement works for Ds’ reference.

25.On 17.6.2020, So, Ho & Co by letter denied the matters stated in the 15.6.2020 letter by Joseph C T Lee & Co, and writing that D2 “delivered the keys and the vacant possession of [the Property] to [P] on 24 April 2020.” This was denied by Joseph C T Lee & Co on 23.6.2020.

26.It is undisputed that parties met on 15.7.2020 (“the 15 July Meeting”)[12]. P says this was for the purposes of takeover of the Property. A Takeover Sheet, which was not signed, was produced (“the Takeover Sheet”). On it were scribbles, which Jackie in oral evidence says were her writing on 15 July 2020 (which P does not challenge), which reads “The keys have been w/ ground floor security since Mid-April 2020. [signed] 15/7/2020”. On the same Takeover Sheet were P’s remarks as to what P says were outstanding reinstatement works by D1.

27.Further lawyers’ communication followed. Those acting for P continuing to seek full payment of rents and fees due and referring to the failure to reinstate the Property. In the letter by So, Ho & Co for Ds dated 3.9.2020, the case of Early Termination Agreement (in the version prior to the amendment of pleadings by D2) appeared on documents for the first time, and Ds alleged the date of delivery of vacant possession to be 6.4.2020. Correspondences thereafter were various demands by P and denials by Ds, eventually leading up to the issuance of these proceedings.

The List of Issues

28.According to the Partially Agreed List of Issues dated 6.6.2024 (“the List of Issues”), the issues before the Court are as follows:

(1) Whether at the meeting(s) on or about 12.3.2020 to 14.3.2020, the Early Termination Agreement was reached;

(2) Whether the Tenancy Agreement was terminated by the Early Termination Agreement;

(3) Whether (i) it is open for D2 to rely on waiver and/or estoppel based on the Early Termination Agreement and (ii) the terms of the Early Termination Agreement proposed or acquiesced by P constituted representations to the effect that P has waived its right to pursue against D1 under the Tenancy Agreement;

(4) Whether D1 relied on the representation of P as in the Early Termination Agreement in that D1 had performed the obligations under the Early Termination Agreement by (i) payment of HK$62,000; (ii) D1 endeavouring to perform reinstatement work to comply with the 1^st and 2^nd Revised Reinstatement Specifications, and P not expressing dissatisfaction of the same; (iii) surrendering the Property by delivering the keys to JLL on or about 6.4.2020; such that it is inequitable for P to go back on its representation and P is estopped from seeking relief against D2;

(5) Whether D1 had breached the Tenancy Agreement, and consequentially D2 as guarantor is liable to pay P the arrears and damages as claimed.

PRELIMINARY ISSUES

29.Before going to the substance of the analysis, several preliminary issues have to be addressed.

30.The first concerns the admissibility of the various without prejudice letters summarized above at paragraphs 18 to 27 above.

31.Counsel for D2 in closing[13] argued for the first time that:

(1) D2 did not raise objection to the production of without prejudice letters[14] “because the salient issue … is whether the Parties have reached any settlement agreement for Early Termination of Tenancy”.

(2) D2 says “the relevancy of these without prejudice letters must be limited” and “can at most be used to support the claim that there was no express surrender/settlement concluded between the Parties.” Citing Foskett on Compromise (9^th ed) at §19-18, D2 argues that “for other matters, the ‘without prejudice’ rule still applies”, and “an essential feature … is that something communicated on ‘without prejudice’ basis should not be capable of being treated subsequently as an admission or acknowledgement of facts or liabilities if the negotiations fail.”

32.I reject D2’s arguments as D2 has clearly waived any privilege attached to such without prejudice letters. As a matter of legal principles, as stated in Foskett on Compromise (10^th ed):

(1) at §19-04: the “without prejudice” rule is founded partly in public policy (the encouragement of parties to speak freely to promote settlement) and partly in the agreement of parties. It is not absolute, and parties can expressly or implicitly consent to the deployment of the “without prejudice” material in evidence and/or accept a repudiatory breach of the implied contract, freeing parties to deploy such evidence;

(2) at §19-57: A waiver would render all of the “without prejudice” communications admissible. One party may by conduct seek to place material subject to the privilege in evidence at trial, or refer to it in their pleadings. The other party may then choose to accept such a breach of implied contract not to deploy such material, or consent to its use, and thus to the waiver. The Court is to assess whether there was implied consent or agreement objectively, taking into account all the circumstances of the case.

33.Factually, D2 have had ample opportunity to object to inclusion of the letters before commencement of trial. Such letters appeared in P’s Lists of Documents, in the index of the trial bundle and the trial bundles themselves long before trial. Despite my express query regarding inclusion of the same without prejudice letters, Counsel for D2 raised no such objections be it during opening or when D2 was specifically cross-examined regarding such letters.

34.Applying the principles to the circumstances, I find objectively there had been a clear waiver by both P and D2 of any without prejudice privilege amongst the parties, without limitation as to their use.

(1) P’s intention to deploy without prejudice materials in trial was clear from P’s referring to the same in pleadings and including them in the trial bundle.

(2) Despite ample opportunity to raise objections, none were so raised by D2 as Counsel for D2 admitted in his written closing. D2 clearly consented to the waiver of privilege and deployment of such evidence in trial.

(3) D2’s submission that the use of the without prejudice letters should somehow be limited has no merits:

(a) D2 proffered no factual nor legal basis on how a “partial waiver” with limitation as to use can be justifiable given the circumstances.

(b) P is relying on the without prejudice letters to inter alia show there was never any agreement for early termination reached between parties. Counsel for P put to D2 that if there were any prior early termination agreement reached in 12-14.3.2020, Ds would not afterwards through their solicitors negotiate with P for a termination and/or engross on the Draft Surrender Agreement without mentioning such prior agreement. Counsel for D2’s written submission that “the without prejudice letters can at most be used to support the claim that there was no express surrender/settlement concluded between the Parties” was in effect a concession.

(c) Counsel for D2 orally argued that the letters are evidence that there was no written surrender agreement reached, but it does not mean that there was no oral agreement reached. With respect, the same is devoid of merits which I reject.

35.The second preliminary issue concerns late introduction of documentary evidence. Both sides filed supplemental list of documents and sought leave to adduce such new evidence. I ruled against both parties’ applications with reasons to be provided. Herein are my reasons.

36.In assessing the applications for introducing new documents, I adopt the principles succinctly summarized in Lam Chin Pang and Anor v Wan Sui Ying [2018] HKDC 1169 at §§30-31, citing Hong Lok School Limited and Anor v Chow Sai Yiu [2003] 2 HKLRD 782 and Liu Chen v Chan Poon Wing and Anor (HCPI 779/2006, 7.10.2009, Master Marlene Ng, unrep):

(1) “…it behoves a litigant giving discovery at the eleventh hour … to provide the court and the other side with full and accurate information … to enable the court to exercise its discretion properly in dealing with possible objections from his opponents,

(a) the reasons why these documents were not disclosed earlier;

(b) the provenance and the makers of these documents;

(c) the relevance of these documents to the issues before the court;

(d) the availability or non-availability of the makers to attend trial for cross-examination in case his opponents make an application under [s. 48 of the Evidence Ordinance].”

(2) “After the CJR, the court is even more jealous to ensure that the trial would proceed as scheduled. Last minute applications fly in the face of the underlying objectives of the CJR…

“… the court is generally unhappy with last minute applications at the commencement of…hearing for further evidence to be filed or for further discovery to be made … after the implementation of the CJR, if there is any last minute application (which necessarily must be a rare occurrence), the court will not expect anything less than … a full account for the lateness of the application. In addition, it is further expected that the applicant will place before the court full justification as to why the application should be entertained at all at such late stage notwithstanding the underlying objectives. Failure to do so may result in the court rejecting the application without further ado, especially if there is a history of breach of court timetables or if there is something in the conduct of the applicant that gives rise to suspicion of conscious manoeuvering.”

(3) “Whether a late application for further discovery should be allowed is a balancing exercise and the considerations are largely three-fold:- (1) The merits of the proposed application, i.e. whether the application if granted will assist the court in securing ‘the just resolution of disputes in accordance with the substantive rights of the parties’ (2) the presence or absence of any real prejudice to the other party. (3) Any conscious flouting of rules of court, practice directions and/or case management timetables, or any over-reaching or deliberate manoeuvering on the part of the applicant.”

37.Further, as summarized in Technic Star Universal Limited v Tiny Love Limited [2021] HKCFI 2284 at §25 citing Kinetics Medical Health Group Company Ltd & Anor v Dr Tse Ivan Cheong Yau (HCA 1115/2010 unrep, 8.5.2013 at §§32-33 per Deputy High Court Judge Marlene Ng (as she then was), where discovery is given at the eleventh hour just before trial, it is impermissible for the litigant seeking to rely on such new evidence to do so under the guise of voluntary discovery without seeking leave of the court, and it is incumbent on a litigant giving such late discovery to make proper inter partes application to seek leave.

38.Regarding D2’s application:

(1) D2 sought leave to adduce (a) a set of alleged “reinstatement specifications P made available to D at the meeting held on 14.3.2020”, with certain scribbles/annotations allegedly by Jackie, and (b) a document titled “Transcription of handwritten notes on documents”, which according to D2’s oral submission was prepared by D2’s solicitors after taking instructions (collectively “D2’s New Documents”). No evidence as required in Hong Lok School has been filed by D2 in explaining her application.

(2) D2 by solicitors’ letter dated 31.5.2024 sought agreement from P to include the D2’s New Documents. D2 said the same were “part of Item 3 of D2’s List of Documents”, and noted that D2 will further apply for amplification of evidence in chief of Jackie in relation to the same. This was rejected by P’s solicitors on 4.6.2024, disagreeing that the D2’s New Documents were part of Item 3 of D2’s List of Documents, stating that D2’s application is extremely late, and how D2 was to make use of the documents was unclear.

(3) Counsel for D2 argued that the D2’s New Documents should be allowed in because they were “contemporaneous records” and are highly relevant as documents being handed to D2 by P at the meetings in March. He relied heavily on what appears to be “rec’d 14/3” scribbled on the documents to say they were indeed contemporaneously received and written on 14.3.2020. D2 says these are the “original Reinstatement Specifications” provided by P to Ds in the meetings in March 2020 as referred to in D2’s ADEF at §7[15]. D further argues that the D2’s New Documents had already been disclosed to P’s solicitors by way of letter in May 2024, therefore there should not be surprise or prejudice.

39.Having considered the circumstances and in exercise of my case management powers, I rejected D2’s application for inclusion of the D2’s New Documents as admissible evidence:

(1) No proper reasoning nor evidence have been given by D2 to explain the clear delay and potential prejudice caused by such late inclusion of evidence.

(2) If the D2’s New Documents were the “original Reinstatement Specifications” referred to in D2’s ADEF at §7, then their importance should have been obvious to D2 by 21.9.2022 being the date of amendment of the ADEF. Yet, despite the express reminder by this Court at the Pre-Trial Review hearing on 25.4.2024 (“the PTR”) that D2 has to take timely action for disclosure of documents, D2 has chosen to leave the matter to the first day of trial. If D2 suffers any prejudice by being unable to rely on such documents, such is in reality self-inflicted.

(3) I cannot accept Counsel for D2’s suggestion that the D2’s New Documents are “contemporaneous”:

(a) D2 filed no evidence in support of her allegation as to when and how the documents came about, and who made the scribbles when. As such, Counsel for D2’s allegations remain evidence from the Bar Table which is unacceptable.

(b) That the words “rec’d 14/3” had been written does not mean the D2’s New Documents were in fact received by D2 on 14.3.2020.

(c) The transcriptions of the annotations were done by D2’s solicitors according to instructions, with footnotes which go beyond mere transcriptions. That by definition is not contemporaneous.

(4) Further, from the evidence before me, these documents could not have been under “Item 3 of D2’s List of Documents” as suggested by D2’s solicitors’ letter on 31.5.2024:

(a) Counsel for D2’s written submission[16] that “the 5-page Annotation should have been included in item 3 of D2’s LOD dated 30 January 2023; the omission was discovered during the PTR” inherently admits the D2’s New Documents were not in fact so included;

(b) D2’s case now is the D2’s New Documents were “received on 14.3.2020”. Item 3 of D2’s List of Documents, which thereafter become Item 50 of the Trial Bundle, was described as “Copy documents and name cards received … during the meeting … held on 12^th March 2020”. The dates simply do not match.

(c) Counsel for D2’s submission that [17] “At PTR … P’s legal team expressly confirmed that the 5-page documents were provided by P to D2 during the 14 March 2020 Meeting” is not supported by evidence and contradicted by D2’s solicitors’ letter dated 31.5.2024 seeking P’s agreement to the same effect (without referring to any earlier agreement at PTR).

(5) The Court’s Note for the PTR contradicts D2’s stance. It reads “Zhu (D): Item 3 of list of doc addressed. [colour printed annotated doc handed up by Mr. Zhu]. Court: What is the purposes of such doc just handed up. Zhu: Wish to transcribe the annotation on the doc … Yeung (P): Last 5 pages were not disclosed … Clean copy was passed to D by P. So P don’t have the annotated version.” There appears to be a misleading attempt to slip in evidence, giving rise to suspicion of conscious manoeuvering. How D2 was apparently able to, after 14.3.2020 but prior to the PTR, pass a clean unannotated copy of the same document to P when on D2’s case the annotations should have been in existence since 14.3.2020 is regrettably suspicious and questionable. I brought this to parties’ attention but the matter remains unexplained by D2. This weighs heavily against D2’s late attempts to adduce such evidence.

(6) The late introduction of D2’s New Documents, coupled with D2’s application for oral amplification of evidence-in-chief of Jackie (which I reject for reasons stated below), causes serious prejudice and unfairness to P. D2’s case relying on such documents will remain unclear until after examination-in-chief of D2’s witnesses. P is deprived of the chance to verify the authenticity of the D2’s New Documents (as documents allegedly dated 14.3.2020) and/or take prepare against D2’s case. Intentionally or otherwise, the effect of ambush and surprise and/or derailing effect on the trial dates are clearly present. D2 has no proper answer to such concerns of this Court.

(7) In any event, I disagree with D2 on the purported level of importance of the D2’s New Documents. Counsel for D2 hinted in closing that if Jackie could have referred to additional documents she might have proved a better case. However, D2’s New Documents at most shows there were discussions (in draft)[18] regarding reinstatement on 14.3.2020. However, that there were discussions regarding reinstatement in March 2024 is undisputed. The issue is rather whether any agreement or unequivocal representation has been made between parties regarding early termination. The alleged annotations (even with the transcripts by solicitors of D2), without an impermissibly wide and late attempt to amplify evidence as I shall deal with below, do not remotely suggest the formation of any agreement or unequivocal representation for early termination.

40.Regarding P’s application:

(1) P by a 2^nd Supplemental List of Documents seek to adduce:

(a) A copy of letter from JLL to D1 dated 24.6.2020 requesting reinstatement of the Property to bare-shell condition and delivery of vacant possession by 15.7.2020, with attached reinstatement specifications which both sides confirm are identical to those in D2’s New Documents albeit without annotations;

(b) A copy of a Reinstatement Letter from P to D1 dated 9.7.2020 notifying D1 that the Tenancy Agreement is to expire on 15.7.2020 and demanding reinstatement to bare-shell condition and vacant possession;

(c) Copies of Screen Capture of WhatsApp Conversation between Derek and D2 dating between 5.3.2020 to 15.7.2020, whereby Derek invites D2 for formal return of vacant possession of the Property on 15.7.2020.

(collectively, “P’s New Documents”)

(2) P submitted these documents were contemporaneous, clear and short, and any amplification of witness’ evidence in chief on them will be very short. D2 objects to P’s application primarily based on it being “outrageously late”, that it cannot be said to be in response to D2’s New Documents, and D2 cannot properly prepare in response.

(3) P’s New Documents do appear to be contemporaneous documents which D2 would have possession. However, given my rejection of D2’s New Documents, having balanced the relevant factors, I rule against adducing of P’s New Documents primarily as a matter of fairness between parties and in the interest of preventing derailing of the trial dates.

(4) For the avoidance of doubt, I would have exercised my discretion to allow P’s application if D’s New Documents were allowed to be adduced. P’s New Documents do go to respond D’s New Documents, especially in light of the fact that the reinstatement specification documents attached to JLL letter dated 24.6.2020 (without annotations) appeared identical to D’s New Documents (with annotations). There is apparent factual dispute as to whether such reinstatement specification documents were produced on 14.3.2020 (as D2 says) or 15.7.2020 (as P says). But allowing such new factual arguments to be engaged at such late stage, with possible amplification of evidence-in-chief and/or filing of witness statements by both sides will inevitably derail trial completely, which is against the spirit of the CJR.

41.The third preliminary issue concerns D2’s application for amplification of Jackie’s evidence-in-chief. D2 in her written opening sought to apply under O 38 r 2A of the Rules of the District Court (Cap 336H) (“RDC”) for “leave to amplify the witness statement of [Jackie] by way of oral examination”. The application was made without draft supplemental witness statements nor evidential support. In the written submission, no limitation of scope was stated. The application was refused after having heard parties, and below are my reasons.

42.The reasons cited by D2 in support were:

(1) The annotations by Jackie made during the meetings on 12-14.3.2020 are critical[19]; such annotations use various colors, symbols and numbers, and “one cannot expect a detailed explanations of all these above without a potentially overelaborated supplementary witness statement.”

(2) D2’s legal team was “only confirmed around one week before PTR”.

(3) Allowing Jackie to orally amplify her evidence in chief will “save time and costs”.

(4) P cannot be surprised or prejudiced because D2’s intention for amplification had been raised at the PTR and by letter dated 31.5.2024.

(5) Orally, Counsel for D2 further submitted that “this Court may well be interested in why Jackie has jot down some key terms and certain figures”, and “the scope of [his] amplification would be inviting Jackie to explain what the numbers and the notes stand for and why she made the notes”. He said he had “around 20 open questions” for Jackie, he thought some of the answers will be short. He did not inform the Court as to what such questions may be.

43.The law on applications for oral amplification of evidence-in-chief is clear. Wong Shing Chai Jimmy v Good Allied Investment Ltd (unrep, DCCJ 4472/2014, 7.12.2017), with principles from Ng Kam Chun, Stephen v Chan Wai Hing, Janet and Others [1994] 2 HKLR 89 at 90 endorsed in the Civil Justice Reform Final Paper at §§587-590, states:

(1) Post-CJR era, there must be special circumstances justifying viva voce evidence-in-chief, since the underlying objectives of the CJR work against wasting the time and costs incurred in the preparation of witnesses statements.

(2) The witness statement should contain the whole of the witness’ evidence in the detail in which the witness would have given it if his evidence had been elicited by oral questions at the trial. Anything less than that prevents the statements from serving the purposes which they are intended to achieve-saving time, eliminating element of surprise, enabling the parties to know the full strength of the case they have to meet, and enabling counsel to prepare a crisp and effective cross examination.

(3) In the absence of special circumstances, evidence-in-chief of a particular witness should be contained in his witness statement.

44.Similar observations were made in Leung Chin To Michael v Wong Siu Cheuk Ping Selina [2023] HKDC 376. As held therein:

(1) Citing the final report of the Civil Justice Reform, the court could be expected to disallow any amplification of evidence if it would take the other side by surprise, unless there was good reason to do so.

(2) Rule 2A(7) and (7A) of the RDC do not intend to give general blessing to the practice of reserving matters in response to the opponent’s evidence to oral examination-in-chief. The interplay of prejudice and good reasons vary from case to case.

(3) The practice of generally allowing witnesses to reserve their responses to oral examination-in-chief runs contrary to the spirit of the CJR.

(4) If the witness has particular matters he could speak of to show that the opponent’s evidence should not be preferred by the court, it is reasonable and fair for such specific factual matters to be put in a supplemental witness statement well in advance of trial.

(5) The respondent of such application has lost the opportunity to test such case pre-trial, and prejudice will be exacerbated if no draft supplemental statement was proffered such that the opponent was alerted to the gist of the scope of the additional evidence.

45.I find the principles summarized above apply on all fours against D2’s application to amplify Jackie’s evidence-in-chief, which I accordingly reject. In particular:

(1) There is no draft supplemental witness statement. Even after the benefit of D2’s submissions, neither P nor this Court know even vaguely what the witness may say.

(2) It was not D2’s case on pleadings or witness statements that Jackie made the relevant annotations, let alone contemporaneously. P will be taken by surprise if D2 were to be allowed to, for the first time in trial during examination-in-chief, to supplement Jackie’s case and evidence in such manner.

(3) The intended scope of amplification of “inviting Jackie to explain what the numbers and the notes stand for and why she made the notes” go beyond mere explanation of meaning of annotations. It will potentially lead to Jackie giving hitherto unheard of versions as to what was allegedly said, and why matters were allegedly written at relevant meetings. This goes to the very core of parties’ dispute which will catch P by surprise, causing irreparable prejudice and unfairness.

(4) This is particularly impermissible given Jackie will be giving evidence after P’s witnesses have given evidence. This will lead to either P being deprived of the chance to lead evidence in rebuttal, or may require recalling of P’s witnesses which could completely derail the entire trial half way through the evidence.

(5) No proper explanations have been given for the lateness, or why a properly drafted supplemental witness statement was not available. All the factors point to an ambush by D2 without justification.

46.With the preliminary issues dealt with, I shall now go into the substance of the case.

PARTIES’ RESPECTIVE EVIDENCE

47.At trial, witnesses who gave viva voce evidence were as follows:

(1) P called: Ms Jenny Chang (“Jenny”), Senior Leasing Manager of Circle Property Development Limited (“Circle Property”) which was P’s representative in terms of leasing matters regarding Circle Tower at all material times; Mr Derek Chan (“Derek”), Senior Leasing Officer of Circle Property; and Mr Tam Kwong Lau Larry (“Larry”), Assistant to Managing Director of Circle Property.

(2) D2 called herself, and Jackie, who was “assistant” to D2 in relation to handling of the Tenancy Agreement at the material time, and who was also the god daughter of D2.

(3) D2 on the second day of trial did attempt to call Ivy as an additional witness. This was without proper notice, summons, draft witness statement, evidence or arguments to explain such belated attempt mid-trial and/or the obvious prejudice this will cause. The application was duly rejected.

P’s case

48.Jenny, Derek and Larry’s Witness Statements support P’s case from their respective duties, roles and perspectives in Circle Property. They explain the relevant contemporaneous documents and factual matrix at the time in gist as follows:

(1) D1 began to default in repayment of relevant rent and fees beginning since the latter half of 2019. Around December 2019, D2 called Jenny seeking for decrease in rental which was rejected.

(2) By mid-January, Jenny contacted D2 stating that there may be a reduction of rent by 10%, which was refused by D2 who instead requested for early termination of the Tenancy Agreement. Jenny stated there is no such “early termination mechanism”.

(3) Jenny, Derek, Larry, D2, Jackie and Ivy were present at the 12.3.2020 Meeting, during which:

(a) Ds’ side asked for early termination. This was rejected by P’s side, which demanded complete repayment of all rents and arrears. Ivy suggested Ds to pay HK$62,000 as partial payment of Ds’ dues to decrease interest accrual. D2 took out a cheque of HK$62,000 which Jackie stated was given in “good faith”. P’s side stated this will be used in partial repayment of the rental due for December 2019, which D2 took no objection to.

(b) Ds’ side proposed the March Proposed Terms. P’s side stated the Leasing Committee will have to be consulted, and pending its approval the Tenancy Agreement remains binding. No agreement was reached between parties on 12.3.2020.

(4) D2 and Jackie visited the office of Circle Property on 14.3.2020 without prior appointment. P’s side informed D2 and Jackie that the Leasing Committee has not yet approved of the March Proposed Terms, Jenny and Larry cannot answer D2, Saturday and Sunday are rest days, and asked D2 and Jackie to leave. No agreement was reached between parties on 14.3.2020.

(5) Derek and Larry did communicate with General Well Design & Decoration Co Ltd, contractor hired by D1 for reinstatement work (“Ds’ Contractor”). Ds’ Contractor estimated work to be completed by mid-April 2020, but this was not acceptable to P and not matching the March Proposed Terms.

(6) By 26.3.2020, the Leasing Committee approved of the March Proposed Terms and instructed Joseph CT Lee & Co to prepare the Draft Surrender Agreement, which was not signed despite invitation. As such, the Tenancy Agreement remained valid.

(7) Ds did leave a key to the Property with JLL, but this was not known to Circle Property and/or P at the time. P later knew that such was done for convenience of the Ds’ Contractor’s access to the Property for reinstatement work. During the material time until 15.7.2020, Ds were free to access the Property all along and/or remove any relevant machineries as they find fit.

(8) On 15.7.2020, Jenny, Derek, Larry, D2 and Jackie were all present, with D2 returning the key to the Property to Derek on behalf of P. Derek inspected the Property and found many aspects which do not fulfill the “bare-shell” reinstatement requirements, and P produced the Takeover Sheet. The Property was never eventually reinstated as per the “bare-shell” condition, and P had to engage its own contractors to complete such works incurring costs and expenses.

49.In cross-examination, Counsel for D2 made inter alia the following challenges:

(1) Relying on the file name of a 租客遷出 - 租務結算清單with a “Billion Ace Limited\Surrender” sub-folder name, it was suggested to Jenny that P was “prepared to discuss early termination of the Tenancy Agreement with D2 at the 12.3.2020 Meeting”. Jenny disagreed, stating the document and the subfolder name were not created by the leasing department. When tenants are in arrears of rent, sometimes such tenants may contact the accounts department of P, and the accounts department will work on such particulars and/or accounts. Jenny does not know if D2 called the accounts department, which may have led to creation of this document.

(2) It was put to Jenny that by cashing the cheque of HK$62,000, P accepted the Early Termination Agreement and that such HK$62,000 was full and final settlement of the then due arrears rent and fees. Jenny disagreed, stating the payment was to off-set partially the due rent for December 2019. It was then put to Jenny that if so, then there should have been an adjustment in the interest accrued for the same period in the relevant租客遷出 - 租務結算清單. By reference to the租務結算清單found at [C2/284] dated 2.3.2020 and at [C1/120] dated 31.3.2020, Jenny was able to calculate and point out that there was (i) a deduction of the rental due for December 2019 from HK$89,000 to HK$27,000 (the difference being HK$62,000) and (ii) the interest for the December 2019 due rental was reduced accordingly to account for reduced due principal from 12.3.2020 onwards. Accordingly, this matches with P’s case that the HK$62,000 was for partial payment of due rental in December 2019. Counsel for D2 did not challenge the correctness of such calculation.

(3) Counsel for D2 suggested it was “not often for tenants to request for early surrender of tenancy agreements” to which Jenny and Derek agreed it was not often. It was then suggested by D2 that it was “not often that tenant draw cheque for partial payment of rent without knowing the details of the account”, to which Jenny stated she cannot comment on how often or not this is but D2 was the only one doing so in her experience, and Derek expressed he has no idea. It was further suggested to Derek that it is rare for tenant to agree to reinstate a property without early termination, to which Derek disagreed.

(4) Counsel for D2 put to Derek and Larry that the documents from [C2/283] onwards, including pictures and accounts, were provided by P to D2 at the 12.8.2020 Meeting, relying on the scribbles “rec’d 12/3”, which Derek and Larry disagreed.

(5) Counsel for D2 questioned Derek as to who proposed leaving behind of cooking machineries, to which Derek answered it was D2 who proposed the March Proposed Terms. Counsel for D2 suggested that “in commercial lease industry, no restaurant operator will agree to leave behind fittings and cooking machinery unless required by the landlord”, to which Derek and Larry disagreed.

(6) It was put to Derek and Larry that they “walked through reinstatement specifications” with and gave instructions to Ds’ Contractor, to which Derek and Larry disagreed.

(7) It was put to Larry that he was responsible for leasing matters. Larry explained his role was not to follow up on leasing matters, but he does patrol the building from time to time and thus knew the features of fittings and/or glass windows of the building, and therefore was involved in checking the status and reinstatement requirements of relevant premises.

(8) It was put to Larry that Ds’ Contractor stayed until 2.5.2020 because of Larry’s instructions, and that Ds’ Contractor left by 2.5.2020 because by then reinstatement was completed to satisfaction of P. Larry disagreed.

D2’s Case

50.D2 and Jackie’s Witness Statements were unhelpful as they were essentially identical to D2’s ADEF, without any first-hand factual details nor elaborations on the various documentary evidence.

51.The Court notes that Jackie is clearly fluent in written and oral English, and D2’s witness statement and ADEF (written in English) does not contain any interpretation clause.

52.During cross-examination of D2:

(1) D2 said she worked as an air hostess and studied in the US, Taiwan and Singapore, but claimed for the first time her English was not very good albeit she “understand some”.

(2) D2 said she had no impression of ever having instructed Hon & Co and/or So, Ho and Co. to act for her. D2’s said she had bad memory due to old age.

(3) D2 insisted by paying the HK$62,000 to P Ds had paid P more than what was owed. She claimed that P told her that Ds can leave after Ds “paid all the money due”, Ds have paid all the money due and extra HK$62,000 on top, and therefore she can shutdown shop and leave.

(4) D2 was asked about the Lawyers’ Correspondences (which post-dated 14.3.2020), in which lawyers represented Ds to inter alia negotiate on terms of the Draft Surrender Agreement, offer to pay further sums to settle amounts due, and/or state Ds “would like to surrender the Property”. D2 said she does not remember such things, have not read such letters, did not know why such letters were written for her, and denied having caused such letters to be sent on her behalf. D2 further denied having received any of the demands for payment from P.

(5) D2 stated she left the keys with the security on 15.7.2020, and did not see representatives of P. When asked to confirm whether her case was that since 6.4.2020 D2 cannot access the Property, D2 disagreed that that was her case.

(6) D2 was adamant that she/Ds paid all the rent, Ds did not owe P anything, therefore Ds can leave. D2 asked rhetorically to the effect that “why would I find lawyers? I paid [the rent] every month on time. Why would I find lawyers to write letters to the Landlord?”

(7) When asked about the Ds’ Contractor, D2 insisted she spent a lot of money to reinstate, that she believes she has reinstated everything, therefore she left. She claimed that Jenny told her that Ds “can leave” after reinstatement of the Property, that Ds complied, and that was enough for a surrender.

(8) When asked about specific details on the accounts and/or reinstatement, D2 simply repeats she has “paid everything”, “done everything”, “spent a lot” and “fixed them all” without any specifics. D2 qualified only by saying she did not fix the toilets because they were “as they were when Ds took over”. D2 refused to comment on documentary evidence which appeared to contradict her case. She claimed she was “unhappy” and/or “angry” and would not give direct answers when asked about such documents and/or details.

(9) D2’s answers to many questions on details of meetings, what was said, what was done, what documents were or were not handed to her at meetings, and/or why certain emails or letters were written etc. were simply “I do not remember”.

(10) D2 denied ever receiving or reading any of the undisputed email correspondences between parties, even though Counsel for D2 accepted that the recipient email address “[email protected]” was D2’s email address, and there is no dispute of veracity of email records. She would refuse to answer any questions regarding such emails claiming she “does not remember”, “has not received”, and “does not understand”, even when the content of such emails were easy to read and were read, explained and interpreted to her. D2 further claimed she “did not receive emails because she often flew back to the US”.

(11) When it was put to her that there was no contemporaneous record at all of D2’s alleged Early Termination Agreement, D2 said this was “strange”, “may be Jackie did not know”, and again claimed lack of memory.

53.In re-examination, D2 said she returned the keys to the securities of the building “after all the reinstatement work has been done”, but she cannot remember when such was.

54.During cross-examination of Jackie:

(1) Jackie said she accompanied D2 to solicitors but did not give instructions to solicitors by Ds, and it would have been D2 who gave instructions to solicitors.

(2) When it was put to her that none of the contemporaneous emails mentioned any terms of the Early Termination Agreement, Jackie said although the terms were not specifically mentioned, the mentioning of reinstatement work “is a term” of and a reference to the Early Termination Agreement.

(3) Jackie said that at the meeting of 12.3.2020, she did not expect there to be different versions of the reinstatement specifications by P. Upon being shown her witness statement which refers to leaving behind of furniture and fixtures “except those specified in the first and second reinstatement specifications”, Jackie said this was incorrect, and the term was actually “that we would need to do reinstatement, and that they would give us the reinstatement criteria … there would be reinstatement, and that they would provide us with the reinstatement forms, what ended up being, consequently, was the one and two, we referred to, the reinstatement specifications.”

(4) In terms of demeanor, even though Jackie was normally audible and understood questions put to her well, the Court noticed she would at times soften her voice and appeared uneasy and/or coy (eg by looking down at the witness bench and not at counsel for P, not giving straight answers, pausing for long and/or mumble). The Court had to remind Jackie to speak louder on multiple occasions.

(5) When asked specific, closed questions, Jackie tried on multiple occasions to supplement on matters not asked, seeking to give version of facts which were hitherto not apparent from documents. The Court had to remind Jackie to give direct answers to questions posed, instead of trying to generally describe what she thought occurred. This included:

(a) When it was asked whether the term of HK$62,000 as full and final settlement of D1’s liability was discussed. Jackie tried to generally describe how parties went through a statement, walked through each components, do calculations and arrived at the figure of HK$62,000.

(b) When it was suggested to Jackie that her allegations regarding “only cash the cheque if the Leasing Committee approved” was not in the witness statement and just made up.[20]

(c) When it was suggested that Derek’s email on 26.3.2020 rejected Ds’ Contractor’s estimation of completing reinstatement by mid-April, and Jackie on email disagree. Jackie tried to supplement that it was by P’s actions afterwards of working with Ds’ Contractor that meant P did not reject the estimated time. Jackie then tried to supplement on details of what Derek did with Ds’ Contractor.

55.Counsel for D2 in his re-examination made attempts to canvass generally on the subject regarding the meeting on 12.3.2020, seeking to have Jackie retell what has been said. This was stopped upon objection by P. As I have noted during the hearing referring to HK Advanced Knitwear Co v Chan Chak Man [1965] HKLR 355, the argument that “if a subject had been ‘dealt with’ in cross-examination then counsel is entitled to ‘deal with’ this subject in re-examination” has no merits at all. Re-examination is not a second opportunity for counsel to examine his own witness afresh. It must be confined to matters arising out of cross-examination, and new matters can only be adduced with permission of the judge. See also: Phipson on Evidence, 20^th ed, §12-15.

56.In re-examination, as relevant, Jackie gave evidence to the effect that:

(1) needing to do the reinstatement work was “part of the terms of the early termination”.

(2) On 15.7.2020, because she viewed reinstatement work was finished by mid-April and that’s when Ds passed everything over to P, she did not understand why the Takeover Sheet was required.

LEGAL PRINCIPLES

Early termination of lease

57.Under ss 3, 4 of the Conveyancing and Property Ordinance (Cap 219) (“CPO”), a legal estate (including a lease for a term exceeding 3 years) may be disposed of either by deed or by surrender by operation of law without writing. A surrender by operation of law without writing may be established where, by consent reached between the landlord and the tenant, the tenant returned possession of the premises to the landlord and the landlord accepts such possession. See: 劉惠和 訴 鄭雅麗，DCCJ 2723/2007, 區域法院暫委法官鄧漢標, 18.7.2008, unrep.

58.I adopt the passage from Woodfall’s Law of Landlord and Tenant, Vol 1, 2012 as cited in Alwaysfull Industries Limited v Leung Lai Bing Peggy, LDPD 286/2014, DJ Kot, 4.7.2014, unrep at §53:

“The conduct of the parties must unequivocally amount to an acceptance that the tenancy has ended. There must either be relinquishment of possession and its acceptance by the landlord, or other conduct consistent only with the cesser of the tenancy, and the circumstances must be such as to render it inequitable for the landlord or the tenant to dispute that the tenancy has ceased.”

59.I further adopt as correct the following passages from Megarry & Wade, 10^th ed, §17-088 to 17-089, the earlier equivalent of which was cited with approval in Bellcourt Estates Limited v Victoria Adesina [2005] EWCA Civ 208. The passages are also consistent with Artworld Financial Corp v Safaryan [2009] L&TR 20 relied on by both parties.

“The acceptance of the tenant’s giving up possession estops the landlord from asserting that the lease continues even though the tenant’s act may be in breach of the terms. Acceptance will not be inferred merely because the landlord enters the premises and takes steps to secure them. Abandonment of the premises by the tenant without more (even if rent is unpaid) is not a surrender, because the landlord may wish the tenant’s liability to continue. Nor is the delivery of the key of the premises to the landlord enough by itself. Even if the landlord accepts it, it must be shown that the landlord did so with the intention of determining the tenancy, and not merely because there was no alternative … The test is whether the landlord’s conduct is so inconsistent with the continuance of the tenancy ‘that it can only be justified as lawful on the basis that the landlord has accepted the tenant’s implied offer to give back possession and that he has taken possession of the premises beneficially for himself.’ What is normally required to satisfy this test is evidence that the landlord entered into ‘profitable occupation’, in effect taking the premises over and treating them as his or her own, typically by re-letting them … the conduct on the part of both landlord and tenant must be unequivocal. Mere absence is not enough to indicate an intention to abandon a tenancy. The court should consider the whole of the parties’ conduct before the commencement of proceedings, and where one party’s conduct is ambivalent it is necessary to evaluate the effect of their conduct as a whole…”

60.The crux of the dispute is whether or not D2 can prove the meeting of minds between P and D2 for termination and/or surrender of the Tenancy Agreement earlier than the contractual date of 15.7.2020. If no such express meeting of minds (be it by agreement or by representation) can be shown, then D2 has to show that the landlord’s conduct, in light of the circumstances of this case, was unequivocally inconsistent with the continuance of tenancy.

61.Despite D2’s submissions, Artworld Financial Corp v Safaryan cannot be read as laying down any general proposition that where a landlord directed reinstatement of the premises and/or accepted part payment, such will be considered enough as a termination and/or surrender of the tenancy. Artworld Financial Corp v Safaryan itself specifically noted this §39 by stating, “What matters is that there should not be found to have been a surrender by operation of law unless what the lessor has done in response to the tenant’s departure is consistent only with treating it as a surrender of the term. [Previous decision]… does not act as some kind of a factual precedent or benchmark for future cases, all of which will-in the nature of things-differ in their facts.” Whether the landlord has an intention to terminate the tenancy will, in the nature of things, depend on the relevant facts and evidence of each case.

Waiver/Estoppel

62.Counsel of D2 argued a case of estoppel by representation, or as he coined it, “reliance-based estoppel”. It would appear however the passage cited by D2 from Spencer Bower: Reliance-Based Estoppel 5^th ed at §1.08 was an effort to unify different characteristics of overlapping reliance-based doctrines and “submit” what the author sees as the “common requirements”, as opposed to laying down the test for estoppel by representation.

63.Given how D2 pleaded her case[21], I adopt the leading authority of Luo Xing Juan Angela v The Estate of Hui Shui See, Willy Deceased and Others (2009) 12 HKCFAR 1 on the test for when a promissory estoppel might arise at §§55-56:

“55. A promissory estoppel may be said to arise where (i) the parties are in a relationship involving enforceable or exercisable rights, duties or powers; (ii) one party (the promisor), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers; and (iii) the promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.

56. While it is necessary for the purposes of exposition to identify the separate elements of the doctrine, it should be borne in mind that when applying them to the facts, each element does not exist in its own watertight compartment to be kept separate from the others. Each element acquires its meaning and content in the context of the other elements. This was emphasised by Robert Walker LJ in Gillett v Holt in relation to proprietary estoppel in the following terms: … the doctrine of proprietary estoppel cannot be treated as subdivided into three or four watertight compartments. … [The] quality of the relevant assurances may influence the issue of reliance … reliance and detriment are often intertwined, and … whether there is a distinct need for a “mutual understanding” may depend on how the other elements are formulated and understood. Moreover the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.”

Burden of Proof

64.In the instant case it is undisputed that (i) the Tenancy Agreement was valid and binding prior to March 2020, and (ii) the Property was not surrendered to P in a “bare-shell” condition. As such, barring any valid Early Termination Agreement or waiver and/or estoppel as argued by D2, the terms of the Tenancy Agreement (on termination date, liability for rent and arrears etc and “bare-shell” condition) will be binding on D1 and D2 will be liable as guarantor.

65.D2, being the party seeking to avoid the undisputed terms of the Tenancy Agreement, clearly bears the burden to prove the existence of the facts which justify such avoidance. The well-known general rule that “he who asserts must prove, not he who denies” applies. See: Phipson on Evidence, 20^th ed, §§6-06 to 6-08; Suen Chap Lam v Suen Kit Lin [2020] HKCFI 2643 at §§14 to 16.

66.D2 tried to argue that the burden lies on P to prove the HK$62,000 cheque was delivered for part payment of rent due in December 2019 as suggested by Ivy. This is wrong, as it is D2 who is seeking to impose a condition to the cashing of a cheque. It is trite law that cheque is a bill of exchange, and under s 21(3) Bills of Exchange Ordinance (Cap 19) there is a rebuttable presumption of valid and unconditional delivery by the drawer until the contrary is proven. The burden lies on D2 to prove that delivery was somehow conditional. See: SY Chan Ltd v Choy Wai Bor [2001] 3 HKLRD 145.

Evidence and Credibility

67.I am guided by the general principles applicable as to fact finding and the assessment of credibility as summarized in Chow Sui Hei v Chow Sui Tak [2024] HKCFI 3360 citing Hui Cheung Fai and Another v Daiwa Development Ltd and Others (08/04/2014, HCA 1734/2009) at [77-80] per DHCJ Eugene Fung SC:

“(1) contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2) in deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3) regard should be had to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness' evidence;

(4) care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness' character;

(5) witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be had to their motives and to the overall probabilities”…

… the credit of a witness in matters not germane to the litigation may be of less assistance in the overall evaluation of credibility, and that it is important to have regard to the entirety of the evidence of a witness.”

68.I adopt the following principles and approach in assessing the probability of alleged oral agreements in the context of modern commercial litigation. The best approach would be to put little reliance on witness’ recollections of what had been said at the meetings but base my findings primarily on inference drawn from contemporaneous documentary evidence and known facts.

(1) Leung Chin Sing Rabo and Another v Ko Chan Hay Kelvin [2021] HKCFI 2242:

“42. It is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous documentary record of any kind. The prevalence of e-mails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint…

43. …the best approach for a judge to adopt in the trial of a commercial case is to place little if any reliance on witness’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.”

(2) Taishin International Bank Co Ltd v QFI Ltd HCA 194/2016, unreported, DHCJ Paul Lam SC, 31.8.2020 at §13:

“… human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents … Witness evidence, written and oral, is not without purpose; but, its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.”

69.I adopt also the comments on the unreliability of witnesses who appear to have “selective memory” as cited by P from Ming Shiu Chung and Ors v Ming Shiu Sum and Ors HCA 18407/1999, unrep, DHCJ To, 30.4.2004 at §80 and Chum Hing Lin v Pang Ki Cheung, DCCJ 3040/2012, unrep, DDJ A Kot, 20.7.2015 at §43. In gist, where a witness appears to evade questions by claiming loss of memory, yet at the same time adamantly assert clear memory on matters which tend to be in his or her favour, that is indeed an indicator that such witness is being evasive, incredible and unreliable.

70.I further adopt the judgment of DHCJ MK Liu in Swallow Kingdom Holdings v Lo Kok Shing Leo [2020] HKCFI 2396 at §§31-33, that if a witness has told lies on a central issue, that may have a significant adverse impact on the credibility of his or her evidence as a whole.

71.Relying on Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) at §§15-23 regarding the comments on the fallible nature of human memory, D2 argues that the Court should depend its findings on the documentary evidence and should not read too much into the apparent lack of memory of D2. I find little assistance in the argument. D2 has to show a meeting of minds or P’s unequivocal representation regarding early termination. Nothing in Gestmin SGPS SA requires the Court to turn a blind eye to self-contradictory evidence or apparent evasiveness on core aspects of a party’s case. If D2’s own evidence in cross-examination contradicts D2’s own case, and/or that D2 has no proper answer to P’s case and documentary evidence put to her, this is a matter which the Court must consider in making a finding on the credibility of D2 and whether D2’s case is true on balance of probability. Further, insofar as parties’ case depends on interpretation and explanation of a contemporaneous document, this is something which will be affected by the credibility and/or lack thereof of respective witnesses.

ANALYSIS

Credibility

72.I find D2 an evasive, unsatisfactory and unreliable witness. Her evidence was on multiple occasions self-contradictory and illogical. Matters not previously mentioned in pleadings or witness statements were raised, yet matters previously raised were abandoned and/or contradicted without reasons. Such self-contradictory and/or new allegations encompassed matters germane and key to her case, including inter alia:

(1) Insisting the HK$62,000 was payment more than Ds owed because Ds never owed rent/arrears to P, when her pleaded case was this was for settlement of a larger amount due;

(2) Her insistence without basis on having “done everything as told by P” only to later qualify this with “except the toilet we never moved”;

(3) Her denying (for the first time during cross-examination) ever receiving or reading any of the emails sent to her email account;

(4) Her denying (or denying recollection of) ever instructing the various solicitors having sent letters and/or filed pleadings on Ds’ behalf without basis, and refusing to comment on solicitors’ letters which appear disadvantageous to her case.

(5) Her claim of memory loss whenever it comes to details of her case on the various meetings between parties, which were core to her own case.

73.In the end, D2’s evidence is unbelievable and contradicts her own case. That D1 did in fact owe rent in arrears before March 2020 has never been disputed. But if (as she was so adamant to stress) D2 never believed Ds owed any rent and/or arrears to P, Ds could not have had an intention to reach the Early Termination Agreement and/or reliance thereto as a representation. This is because D1’s payment of HK$62,000 as full and final settlement of the remaining outstanding of HK$150,574.45 due to P is a fundamental term of the Early Termination Agreement. I am unable to place any meaningful reliance on her evidence beyond what is undisputed or supported by contemporaneous documents, and much of what she says were without support. I find her an untruthful and unreliable witness who has lied on issues core to her case.

74.Specifically, I also reject D2’s baseless evidence that she did not instruct lawyers to write letters on behalf of Ds as seen from the Lawyers’ Correspondences. It is inherently improbable that two sets of solicitors would have acted on their own frolic without instructions to negotiate terms of the Draft Surrender Agreement. Nor could this be explained by D2’s allegation of “bad memory” - it would have been simple for D2’s current legal team to check with previous solicitors why letters were written. D2’s late and baseless allegations, appearing for the first time in cross-examination, were more likely than not a lie and an attempt to turn a blind-eye to evidence plainly against her interest. On balance, I find such Lawyers’ Correspondences on behalf of Ds were written with Ds’ instructions and authority, and thus are contemporaneous records that must be considered in testing D2’s case.

75.I also find Jackie evasive, unsatisfactory and unreliable. Much of what she says were not supported by documents. Her attempts to explain away documentary evidence contrary to D2’s interests were contrived, without basis and unsatisfactory - which was especially unreasonable as she could not have misunderstood plain meaning of emails and letters written in English. Her multiple uninvited attempts to put in new details in answer to direct, closed questions were clear attempts to embellish on D2’s case whenever possible. There were further multiple uninvited attempts to refer to evidence ruled inadmissible and/or areas for which application for amplification had been refused. Her coyness in demeanor further contributes to my finding that she is not reliable and had lied.

76.By contrast, the evidence of Jenny, Derek and Larry were forthcoming, unshaken and corroborated by documentary records. In particular, they were able to recall details of what occurred on a first-hand basis, by reference to the physical setting in the office and/or building at the material time. When necessary Jenny was able to show clearly why certain propositions by Counsel for D2 were wrong. When there are specific matters they are unable to recall or comment on they will so admit candidly. On balance, I accept their evidence as truthful and reliable.

Finding and Analysis

77.Comes written closing, Counsel for D2 sought to advance two further unpleaded versions of his case.

78.First it was argued that “the oral agreement for early surrender and full and final settlement of the dispute was concluded by P’s acceptance and cashing of the cheque of HK$62,000 (the terms of which were set out in §6A of the ADEF ie the Early Termination Agreement)” (“the New Oral Agreement”).

79.Secondly it was argued that there was surrender of the Tenancy Agreement by estoppel:

(1) P unequivocally made the following propositions to D2, which P intended D2 to comply with, for early termination of the Tenancy Agreement and full and final settlement of the dispute:

(a) D2 must reinstate the Property in accordance with the instructions set out in the reinstatement specifications provided by P to D2 on 14.3.2020, 16.3.2020 and 23.3.2020;

(b) D2 must leave behind her valuable cooking equipment and appliances;

(2) P intended D2 to comply with the instructions.

(3) D2 have incurred substantial costs and expenses in compliance with the instructions given by P.

(4) During oral closing, Counsel for D2 says further that “D2 was required to reinstate the property” was obligation one, “D2 was required to complete the reinstatement by 31.3.2020” was obligation two, and “D2’s agreement on obligation one is sufficiently established. D2 does not have to agree on obligation two”.

(“the New Estoppel Claim”)

80.The New Estoppel Claim differs from D2’s pleaded case. Under the ADEF at §16 the pleaded representation was the same as the Early Termination Agreement, D2 performed the obligations “under the Early Termination Agreement”, and the Early Termination Agreement did not require completion and/or compliance with the reinstatement specifications.

81.In light of the evidence and principles summarized above, I make the following factual findings on balance of probabilities, bearing in mind that the burden of proof is on D2 to prove the Early Termination Agreement, the New Oral Agreement and/or the New Estoppel Claim.

Issue 1: Whether the Early Termination Agreement/New Oral Agreement was reached and/or whether the representation under the New Estoppel Claim was made by P

82.On balance of probability, I find that:

(1) The Early Termination Agreement was not reached and/or represented;

(2) The New Oral Agreement was not reached;

(3) P did not represent that upon completion of the 14.3.2020, 16.3.2020 and 23.3.2020 reinstatement specifications Ds are allowed to terminate the Tenancy Agreement early under the “New Estoppel Claim”.

83.Firstly, D2 admitted that her case on the Early Termination Agreement is simply not supported by evidence[22]. D2 in evidence specifically disowned any intention to reach the Early Termination Agreement by saying she “never owed anything to P” and therefore could not have intended to “settle” the due sum.

84.Secondly, whilst clearly Ds wanted an early termination of the Tenancy Agreement[23], and there had discussions regarding early termination, the contemporaneous records show there was no agreement as to the terms of for such arrangement at the meetings on 12.3.2020 and 14.3.2020. All parties concerned knew P’s Leasing Committee’s approval was necessary. By the same token, there could not have been an unequivocal representation by P that Ds may terminate the Tenancy Agreement early as the terms and conditions were simply not confirmed:

(1) As Jackie wrote in her email to P dated 16.3.2020, D2’s provision of the cheque of HK$62,000 was “in good faith, as a reasonable offer for settlement of the outstanding balance” which Ds’ side knew was subject to the Leasing Committee’s being “apprised of” and which Ds side “look forward to receiving a favourable response”. The same was repeated by Jackie on 17.3.2020.

(2) Jenny on 16.3.2020 has stated clearly that the Tenancy Agreement was prevailing. Ds’ side never expressed any disagreement to such statement, which would have been forthcoming if there was any prior agreement for early termination of the Tenancy Agreement.

(3) Even on D2’s own case, D2 only agreed to “obligation one” on completing reinstatement and not “obligation two” on the timing for such completion. There is no basis for Ds to cherry-pick on parts of the alleged promise and treat this as an “unequivocal promise” that Ds may surrender the lease early. Insofar as D2 says “obligation two” is unreasonable, that is beside the point: if no representation or promise acceptable to Ds was made, then parties simply revert to their original contractual obligations.

85.Thirdly, none of the emails and correspondences mention the Early Termination Agreement. Jackie’s suggestion that “mentioning of reinstatement was reference to the Early Termination Agreement” is contrary to D2’s case that the Early Termination Agreement does not require actual reinstatement work being done. As such, the subsequent mention and/or discussion as to reinstatement requirements by email could not, on D2’s case, be referring to the Early Termination Agreement and/or the New Oral Agreement. D2 therefore sought to change her case to the New Estoppel Claim, but as P submitted and I agree, the changing stance of D2 on what was/was not required for early termination makes D2’s case wholly unbelievable.

86.Fourthly, the contemporaneous emails and letters from 16.3.2020 onwards show parties were still in negotiation as to what may be the reinstatement requirements (on both scope and time) and/or other terms for surrender of the Tenancy Agreement. This renders D2’s case on the New Estoppel Claim unbelievable, because there cannot be unequivocable promise if parties were still negotiating on the timing and scope of work required for reinstatement:

(1) On 16.3.2020, Derek sent by email the 16.3.2020 Specification. Clause 2(au) of the Tenancy Agreement, stating “please reinstate the premises up to [P’s] satisfaction. Attached you could find the instruction for the reinstatement issue.” There was no indication that this will be the last reinstatement requirement. As Jackie in her evidence stated, at the time of the meetings (be it on 12 or 14.3.2020), she “did not know when [she] would get the specification work, and [she] did not expect to have more than one reinstatement work.”

(2) By reference to the 16.3.2020 email, D2 sought to argue that because Derek sent reinstatement specifications whilst quoting Clause 2(au), P is taken to have agreed to terminate the Tenancy Agreement early as this indicates “sooner determination”. I reject such argument. As a matter of syntax and interpretation and I so find, under the clause:

(a) The landlord is to “direct” the condition in which the tenant is to deliver up possession.

(b) The words “at the expiration or sooner determination of this tenancy” defines when such deliver up is be performed by the tenant, not when such direction may be made by the landlord.

(c) The giving of direction is equivocal as it may be for the purposes of expiration or sooner determination. The giving of such direction does not imply acceptance of early termination.

(3) On 17.3.2020, Jackie referred to the 16.3.2020 Specification as “final reinstatement specification”. But On 18.3.2020, Derek stated there is supplementary work to be included for the disable toilet. Derek then sent the 23.3.2020 Specification, which included requirements for reinstatement to the disabled/accessible toilet and male toilet, and which required completion by 26.3.2020. Ds refused to and did not comply with such requirements, as shown in Hon & Co’s letter written on behalf of Ds on 20.4.2020. In the same letter, Hon & Co on behalf of Ds described the same as “another revised reinstatement specification … demanded our client to perform additional reinstatement works”, which Ds “shall not carry out”. Parties were plainly disputing on terms of reinstatement still.

87.It is also clear that parties continued negotiation regarding terms of the Draft Surrender Agreement as shown in the Lawyers’ Correspondences, pointing clearly against existence of any prior agreement. The Draft Surrender Agreement required additionally inter alia the transfer of the General Restaurant Licence by Ds to P. Ds engrossed on the Draft Surrender Agreement, agreed to transfer of the General Restaurant Licence to P as of 20.4.2020, asked for revision of the reinstatement requirements, sought a later surrender date, and asked for surrender of the Property and/or a copy of the Draft Surrender Agreement by 15.5.2020. The contemporaneous records all contradict D2’s case.

88.Counsel for D2 relied heavily on “P having sent reinstatement specifications” as basis for finding some agreement for early termination. Yet when asked, D2 was unable to explain why the discussion of reinstatement specifications at the time should on balance point more to the alleged oral agreement as suggested by D2 (which had no documentary support), as opposed to the March Proposed Terms and/or Draft Surrender Agreement as suggested by P (which was clearly evidenced on documents).

89.In light of the indisputable contemporaneous documents, I find on balance of probabilities that whilst there were negotiations between parties regarding the possibility of surrender of the Tenancy Agreement and reinstatement requirements, such negotiations were in furtherance of the March Proposed Terms, and which was subject to the Leasing Committee’s approval and required execution of the Draft Surrender Agreement. I find D2’s case was but a false, contrived account of parties’ negotiations in light of Ds’ failure to comply with the terms of the Draft Surrender Agreement including inter alia transfer the General Restaurant Licence and reinstatement requirements (both in terms of scope and time).

90.Fifthly, I find on balance that the New Oral Agreement did not exist. The cheque of HK$62,000 has been cashed since 16.3.2020. Yet the suggestion that “cashing of the cheque of HK$62,000 means acceptance of the Early Termination Agreement terms by P” has hitherto never appeared until cross-examination, which given its alleged importance renders it unlikely to be true. I find Jackie’s evidence on the same to be without basis and unbelievable. The contemporaneous documents clearly showed that parties did in fact treat the payment of HK$62,000 as part payment of the rental due for December 2019 as P stated (deducting the amount due for December 2019 and interest therein, as Jenny’s calculation showed), and not as full and final settlement of all sums due as D2 submitted. This included inter alia:

(1) the租務結算清單dated 31.3.2020 and the First Schedule to the Draft Surrender Agreement, which was attached to P’s email to Ds dated 31.3.2020;

(2) the letter from Hon & Co dated 27.4.2020, which engrossed on the First Schedule to the Draft Surrender Agreement without disputing the deducted amount due for December 2019 to HK$27,000 and/or interest therein.

91.Lastly, D2’s arguments on generally how “common” or “often” a tenant may leave a leased premise, reinstate the same and/or leave appliances at such premises without an agreement for early surrender is neither here nor there. My task is to find, on balance with the evidence before me, what has in fact occurred in this case. There was no basis for D2 to ask P’s witnesses to comment on the likelihood of such as a market practice as they are not expert witnesses and this is not an expert issue.

92.Given my finding that the Early Termination Agreement and/or the New Oral Agreement was never reached, and P did not represent that upon completion of the 14.3.2020, 16.3.2020 and 23.3.2020 reinstatements Ds are allowed to terminate the Tenancy Agreement early, D2’s case is clearly without merits. I shall for completeness deal with the rest of the issues and/or propositions put forward by D2 as necessary.

Issue 2: Whether the Tenancy Agreement was terminated by the Early Termination Agreement/New Oral Agreement

93.Given my findings regarding Issue 1 above, I find on balance of probability that the answer is “No”.

Issue 3: Whether P proposed or acquiesced the terms of the Early Termination Agreement, the New Oral Agreement and/or the New Estoppel Claim

94.Given my findings regarding Issues 1 and 2 above, I find on balance of probability that the answer is again “No”.

Issue 4: Whether D1 relied on the representation of P as in the Early Termination Agreement, the New Oral Agreement and/or the New Estoppel Claim in that D1 had performed the obligations therein such that it is inequitable for P to go back on its representations

95.Given my findings regarding Issues 1 to 3 above, I find on balance of probability that the answer is again “No”. D2 could not have relied on a representation which was not made. P discussed with Ds regarding the possible terms of a surrender agreement, which resulted in the eventually unexecuted Draft Surrender Agreement. D2’s attempt to extract parts of such negotiation and claim such as the unequivocal representations by P is not supported by the facts and evidence and I find such claim to be false on balance of probability.

96.Secondly, the contemporaneous documents shows on balance that Ds did not in fact rely on any such representations (if any). Ds through solicitors on 20.4.2020, 27.4.2020, 15.5.2020 continued to comment on and/or ask for the Draft Surrender Agreement, showing Ds did not in fact rely on any previous representations as unequivocally allowing Ds to surrender or terminate the Tenancy Agreement early.

97.Further, I find on balance that the 16.3.2020 and 23.3.2020 Specifications have not been completed or complied with:

(1) Ds refused to comply with the 23.3.2020 Specification through Hon & Co on 20.4.2020. It remains undisputed that the male toilet and/or accessible toilet are not reinstated as requested.

(2) As a matter of pleadings, it had never been alleged by D2 that she completed reinstatement in accordance with the respective specifications. To the contrary, D2 always qualified her efforts and/or compliance with “except those items which had been the same before D1 took possession”[24].

(3) D2 has never disputed the content and accuracy of the 永光中心17樓還原規格 dated 19.4.2020 prepared by Larry (“the 19.4.2020 Internal Report”), which shows reinstatement requirements stemming from the 23.3.2020 Specification remaining unfinished, and P had to “urge the tenant to quickly complete such unfinished reinstatement items”[25].

(4) It cannot be inferred from communication by P’s staff with Ds’ Contractors that Ds’ Contractors had performed reinstatement to the satisfaction of P, nor was such inference ever pleaded.

(5) In closing, D2 argued that because Ds’ Contractors remained in the Property until 2.5.2020, therefore the reinstatement works were completed on or around 2.5.2020. It cannot reasonably be inferred from Ds’ Contractors having left that they have completed the task as required by P. Further, detrimental reliance is an element of estoppel which D2 bears the burden to prove. If D2 wished to prove the extent of reinstatement, D2 being the party appointing Ds’ Contractors should have had no difficulty in either calling Ds’ Contractors to support her case, or at least some produce documentary record of what Ds’ Contractors had in fact done. In the end, no such evidence have been produced by D2.

(6) Further, by 15.7.2020 in the Takeover Sheet, remarks were made by P after inspection. In the remarks, it was noted that areas which have not been properly reinstated included inter alia glass windows, toilet and window frame. These items appear to be and I so find were items stemming from the 23.3.2020 Specification which were marked as uncompleted in the 19.4.2020 Internal Report.

(7) When the Takeover Sheet and pictures regarding state of the Property was put to her, D2 in oral evidence said “she made it very pretty”, and suggested for the first time she never scratched the glass windows and there were no scratches when she left. This was again without evidential basis at all which I reject as unbelievable.

98.D2 as a fallback tried to argue that “even if the reinstatement works have only been completed on 2.5.2020, or not been completed to the satisfaction of requirements, it does not affect D2’s case on surrender of the Tenancy Agreement by operation of law (oral agreement and/or estoppel)”, because “once part performance and/or detrimental reliance was in place, the Tenancy was terminated”; “the issue of completion progress of reinstatement works only affects the quantum of P’s claim”. I reject such argument for the following reasons:

(1) D2 cites no authority at all for such proposition, nor has D2 produced any evidence nor explain on the extent of such part performance of reinstatement and/or why such was sufficient;

(2) As held in Luo Xing Juan, each element in estoppel does not exist in its own watertight compartment to be kept separate from the others. Each element acquires its meaning and content in the context of the other elements. The quality of the relevant assurances may influence the issue of reliance, reliance and detriment are often intertwined. The fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine. In the end the court must look at the matter in the round.

(3) Looking at the current case in the round, even on D2’s case based on the New Estoppel Claim, Ds have to reinstate the Property in accordance with the instructions set out in inter alia the 16.3.2020 and 23.3.2020 Specifications. There is no basis for D2 to rely on a belief that a partial performance would suffice. The state of the Property directly affects whether and when P can enter into profitable occupation and/or whether P would have to incur extra costs in reinstating the Property itself. I find there is no basis to suggest inequity in holding Ds to the full terms of the Tenancy Agreement where there had never been completion of the 16.3.2020 and 23.3.2020 Specifications.

Issue 5: Whether P’s conduct was unequivocally inconsistent with the continuance of tenancy such that there has been “surrender by operation of law” of the Tenancy Agreement

99.Given my findings in Issues 1 to 4 above, I find on balance of probability that D2 cannot rely on the Early Termination Agreement, the New Oral Agreement and/or the New Estoppel Claim to suggest surrender by operation of law of the Tenancy Agreement.

100.Further, I find on balance that P’s conduct was not unequivocally inconsistent with the continuance of tenancy:

(1) Ds placed a key to the Property at the security in April 2020 merely to allow contractors easier access to the Property. Ds might have voluntarily left the Property having ceased operating D1’s business as a restaurant, but there was nothing stopping Ds from entering the Property between March 2020 to July 2020.

(2) The official taking over of the Property occurred on 15.7.2020. There was no entering into profitable occupation or taking of possession beneficially by P of the Property prior to 15.7.2020.

(3) Giving of reinstatement specifications under clause 2(au) of the Tenancy Agreement and conducting of reinstatement works were not inconsistent with continuance of the Tenancy Agreement.

(4) Whilst there were some reinstatement works conducted by Ds through Ds’ Contractors, parties were in negotiation and disagreement as to the scope of work and time required, and Ds never completed the 16.3.2020 and 23.3.2020 Specifications.

(5) Parties knew that unless the Draft Surrender Agreement was executed and complied with (which included terms for full payment of past due arrears and transfer of the General Restaurant Licence), the Tenancy Agreement remained prevailing, as P stated time and again through emails and solicitors’ letters to which Ds never objected to or denied before the Tenancy Agreement expired.

Pleading point

101.During submissions, parties disagreed on whether D2 should be allowed to run her unpleaded case on the New Oral Agreement and/or the New Estoppel Claim. Given my factual finding that neither of them were made out on balance of probabilities, it is not necessary for the Court to decide on this pleading point. For completeness, I would have ruled against D2 on this pleading point in any event.

102.In terms of argument by parties:

(1) Counsel for D2 relied on Poon Hau Kei v Hsin Chong Construction Co Ltd (2004) 7 HKCFAR 18 at §§11-12 and Mak Kang Hoi v Ho Yuk Wah (2007) 10 HKCFAR 552 at §§104-106 to argue that D2 should be allowed to run (i) the New Oral Agreement and (ii) the New Estoppel Claim.

(2) Counsel for P relied on Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21, arguing that the pleaded issues define the scope of the evidence, and not the other round, and it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. Where unpleaded issues are sought to be introduced, amendments must be sought unless consent of parties has been obtained.

103.In terms of legal principles and authority, I observe that:

(1) In Poon Hau Kei, the scenario upon which the plaintiff eventually succeeded was one which the defendant had pleaded. The trial judge’s finding was covered by the pleadings, and the plaintiff had not sought to succeed on a scenario not pleaded by either side and outside the defendant’s contemplation. Ma JA’s (as he then was) ruling as a matter of principle, which the CFA agreed with, was that the court must be satisfied that (i) the issue has been properly before it and identified so that the other party becomes fully aware of the case he has to meet and (ii) the court must be satisfied that the “new version” is one that the other party has been given full opportunity to deal with. It is where both elements exist that the court may, having taking consideration of relevant factors, proceed to make a finding of liability or legal consequence based on the “new version”.

(2) In Mak Kang Hoi, as apparent from the CFA’s decision, there was no dispute between parties that a binding agreement was reached despite their dispute as to the precise terms. There was also no dispute that a public listing of a particular company in question was an essential condition of the transaction and payment over of the money. The “departure” from pleadings by the trial judge was on how long such money may be kept by the recipient where there is no or no realistic prospect of public listing. The trial judge implied from the facts a contractual term that listing will take place within a reasonable time, after which the monies had to be repaid, which the CFA found to be “hardly a radical departure from the pleaded cases”. This was the context in which the Court found the trial judge’s findings were not “unwarranted by the oral dealings between the parties or the contemporaneous documents”, and thus “not unfair … but an attempt to do justice between them according to law.”

(3) In both Poon Hau Kei and Mak Kang Hoi, fairness remains the core essence of the CFA decisions.

(4) I note also from Spencer Bower: Reliance-Based Estoppel 5^th ed at §15.11, p 692 that whilst the Court may uphold an estoppel that has not been specifically pleaded or argued by one party, this is only if the other party has not been prejudiced by the failure, and all the relevant facts are before it, because estoppel is the mechanism by which to do justice in the case.

104.Applying the above principles to the current case, I would have ruled that D2 is not entitled to run the New Oral Agreement and the New Estoppel Claim for the following reasons:

(1) Poon Hau Kei is not applicable to the current case, as D2’s case of the New Oral Agreement and the New Estoppel Claim never existed in any of the pleadings amongst parties nor from the witness statements. No amendments had ever been applied for by D2 to rectify such absence of her new claims.

(2) Mak Kang Hoi also does not assist D2. What D2 invites this Court to do goes beyond asking the Court to find, as a question of mixed fact and law, what were the terms of an agreement which parties agree existed, from factual matrix that no one can be surprised of:

(a) P denies any oral agreement or unequivocial promise having been made in March 2020. D2 seeks to assert as a new material fact that Ds did request, and P did accept, that P will only cash the cheque when the Leasing Committee has approved of terms of surrender of the Tenancy Agreement. This is a new averment unavailable from the agreed factual matrix.

(b) In relation to the New Estoppel Claim, similarly, D2 seeks to assert as a new material fact that P represented that the Tenancy Agreement shall be surrendered upon reinstatement in accordance with the 14.3.2020, 16.3.2020 and 23.3.2020 Specifications whilst ignoring the timing of such completion. Yet there are no particulars at all as to when and how such representation was made, whether expressly or impliedly, whether orally or by conduct, and who were the parties to such representation. The unfairness is obvious given the complete lack of certainty of D2’s case.

(c) Given my analysis above, it is clear that a finding based on the New Oral Agreement and/or the New Estoppel Claim will indeed be “unwarranted by the oral dealings between the parties or the contemporaneous”, catching P by surprise and thus “unfair on [P]”.

(3) D2 in oral closing tried to suggest “D2 did not produce much evidence, but relied on the documentary evidence voluntarily produced by P to establish D2’s case”. This is simply false. D2’s case remained a case theory which was hitherto unpleaded, and the documents simply do not bear the meaning propounded by D2. This is relevant when I consider the unfairness and injustice that may be caused in allowing D2 to run her unpleaded case.

(4) In the end, Poon Hau Kei, Mak Kang Hoi, Kwok Chin Wing and Spencer Bower: Reliance-Based Estoppel 5^th ed at §15.11 all require this Court to assess whether unfairness and/or prejudice would be caused to P. This is necessarily a case-by-case analysis. Looking at the current case in the round, I do find there will be substantive prejudice and unfairness in allowing the New Oral Agreement and the New Estoppel Claim to be run, and I accordingly rule that D2 is not entitled to run the same in any event.

Conclusion on Liability, Quantum and Costs

105.Given the above, having considered the whole of the parties’ conduct before commencement of proceedings in light of the evidence, I find that P’s conduct was not inconsistent with the continuance of the Tenancy Agreement. To the contrary, the evidence showed that P clearly stated and Ds clearly knew that the Tenancy Agreement remained prevailing and binding. There was no acceptance of early termination nor surrender of the Tenancy Agreement between parties by operation of law, be it by the Early Termination Agreement, the New Oral Agreement, the New Estoppel Claim and/or by parties’ conduct.

106.I find that P’s claim against D2 is established. D1 is liable to P pursuant to the terms and conditions of the Tenancy Agreement without early termination, waiver or estoppel. D1 is liable to (i) the full rent and arrears, with interest for the full term of the Tenancy Agreement until 15.7.2020 and (ii) loss and damages for failure to deliver up vacant possession of the Property to P in “bare shell” condition. D2 as guarantor is liable to P accordingly.

107.As for the quantum of loss and damages, as confirmed by Counsel for D2 during opening, D2 has no challenge to P’s case on quantum and D2 has no evidence on that front. Nor has D2 made any submissions on P’s claim for interest. As such, I shall award the following sums to P against D2 in the amount as claimed, namely:

(1) Arrears of Rents in the sum of HK$604,064.52, plus:

(a) The sum of HK$54,884.32, being interest on the Arrears of Rents prior to 28 April 2021;

(b) Interest on the amount of HK$604,064.52 at judgment rate from 28 April 2021 until full payment.

(2) Arrears of Rates, Management Fee, Admin & Water/Sewage Charge in the sum of HK$104,434.26, plus:

(a) The sum of HK$3,612.81, being interest on the Arrears of Arrears of Rates, Management Fee, Admin & Water/Sewage Charge prior to 28 April 2021;

(b) Interest on the amount of HK$104,434.26 at judgment rate from 28 April 2021 until full payment.

(3) Damages for breach of Tenancy Agreement in the amount of:

(a) HK$11,483.87, being the rent for the rent-free period;

(b) HK$169,430, being the costs of reinstatement of the Property, for D1’s breach of Clause 2(au) of the Tenancy Agreement in failing to deliver up the Property to P in “bare shell condition”.

(c) Interest on the amounts of HK$11,483.87 and HK$169,430 at the rate of 6.25%[26] from 15.7.2020 to the date of this judgment, and thereafter at judgment rate until full payment.

108.Costs should follow the event. There shall be costs order nisi that P do have costs of the action (including any costs reserved) to be paid by D2 on solicitor-and-own-client basis, to be taxed if not agreed, with certificate of counsel.

(1) Where parties had entered into a commercial transaction on the basis that costs are to be on a particular basis, the court should be slow to disturb the parties’ agreement, unless the circumstances were such as to cause the court in the exercise of its discretion to intervene. See: Bank of China (Hong Kong) Ltd v Twin Profit Ltd [2011] 3 HKC 59.

(2) P in its SOC sought costs on solicitor-and-own-client basis pleading and relying on clause 4(a) of the Tenancy Agreement. During closing, P sought costs on indemnity basis, relying on clause 4(k) of the Tenancy Agreement which does not appear to have been specifically pleaded in the SOC.

(3) As I have indicated during the hearing, my order shall be on a nisi basis given (i) parties have yet to fully address me on whether P’s reliance on clause 4(k) of the Tenancy Agreement needs to be specifically pleaded and (ii) parties may wish to apply for variation of costs order in light of my decision on the merits and quantum.

DISPOSITION

109.For the reasons given above, I give judgment to P, with damages and interest to be paid by D2 to P as assessed at paragraph 107 above. There shall be costs order nisi that P do have costs of the action (including any costs reserved) to be paid by D2, on solicitor-and-own-client basis, to be taxed if not agreed, with certificate of counsel.

Ms Shannon Leung, instructed by Cheung & Choy, for the Plaintiff

Mr Peter Zhu, instructed by Ling & Lawyers, for the 2^nd Defendant