Canbank Properties Ltd v. Compagnie Nationale Air France
Read the full judgment text of HCA 676/1977 on BabelCite. This High Court CFI judgment was delivered on 4 January 1978.
1. The plaintiff company is the owner of the well-known landmark in the central district of Hong Kong, Bank of Canton Building, and was the attorned landlord of the defendant which I shall call 'Air France' under a tenancy agreement dated 5th December, 1967 entered into between the Bank of Canton Ltd. (the then owner of the building being re-developed) and Air France for a tenancy of the third floor known as room Nos. 301-306 for a term of three years commencing 28 days after the issue of the oc
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HCA000676/1977
Coram: Zimmern, J. Date of Judgment: 4 January 1978 ----------------- JUDGMENT ----------------- 1. The plaintiff company is the owner of the well-known landmark in the central district of Hong Kong, Bank of Canton Building, and was the attorned landlord of the defendant which I shall call 'Air France' under a tenancy agreement dated 5th December, 1967 entered into between the Bank of Canton Ltd. (the then owner of the building being re-developed) and Air France for a tenancy of the third floor known as room Nos. 301-306 for a term of three years commencing 28 days after the issue of the occupation permit at a monthly rent of $6,820 exclusive of rates with two options to renew at the same rent. Air France exercised both options and by an agreement dated 8th February, 1974 upon the former owner and landlord agreeing to provide and maintain a central air-conditioning service, Air France agreed, in addition to the rent and rates, to pay the landlord the sum of $1,193.50 per calendar month for such air-conditioning services. The term under the last option exercised was due to expire on the 2nd February, 1977. The area of the premises was 3,410 square feet making rental at $2 and air-conditioning charges at 35 cents per square foot. 2. The plaintiff company appointed Tai Cheung Management Co. Ltd. as its property manager and day to day business of the latter company was in the hands of its property manager, one Denny Wong, reporting to a management committee. The General Manager of Air France is Bernard Morel. 3. From 4th October, 1976 to 16th November, 1976 there were exchanges of letters between Mr. Wong and Mr. Morel which the plaintiff says culminated into an agreement whereby the plaintiff agreed to grant and the defendant agreed to take a tenancy of the said premises for a further term of five years duration commencing upon the expiry of the original tenancy at the rent of $8 per square foot per month excluding rates and air-conditioning charges. I set out the material parts of the letters in full. 4.10.76. Wong to Air France
4. 11.10.76. Morel to Wong
5. 25.10.76. Morel to Wong
6. 27.10.76. Wong to Morel
7. 12.11.76. Morel to Wong
8. 15.11.76. Wong to Morel
9. 16.11.76. Morel to Wong
10. In my opinion and I so hold the plaintiff's contention that the above exchanges of letters culminated into an enforceable agreement is misconceived. There is clear authority that letters relied on to constitute an agreement must contain the material terms of which the consideration for the tenancy is one. It is obvious on the face of the letters that the parties were agreed on $8 per square foot but that was not the only consideration. Air France was bargaining first $8 inclusive of rates and air-conditioning charges then $8 inclusive of rates then finally agreeing to $8 excluding rates and air-conditioning against the face of Wong's non-waivering stance. The rates were ascertainable but the amount of the charges for air-conditioning, a material part of the consideration had not been mentioned. 11. Mr. Denis Chang, counsel for the plaintiff, argued that an objective test should be applied, i.e. as I understand his argument, instead of the parties agreeing between themselves the charges for air-conditioning to be paid, the court in the person of the reasonable bystander taking into consideration that Air France was then a tenant paying such charges, could and should decide for them. I completely reject this argument. 12. The parties were not negotiating over any option to renew an existing tenancy. They were negotiating at arm's length over the consideration for a new tenancy to commence on the expiration of the old, and the consideration for the then existing tenancy was completely irrelevant to their negotiations. 13. The plaintiff had put far too much emphasis on Morel's letter of 16th November, 1976. Once all the letters have been considered it is clear to me at any rate that Air France having lost the bargaining over whether the $8 was to be inclusive or exclusive finally accepted exclusive leaving it to the plaintiff to make an offer for the charges. In short, the parties were still negotiating. The plaintiff therefore fails and this effectively disposes of the plaintiff's claim but Mr. Chang has raised a further argument and I shall have to go into the evidence. 14. Pursuant to Morel's letter of 11th October, 1976 there was a meeting between himself and Wong over a new tenancy sometime prior to 25th October, 1976. There was a conflict of evidence. Wong said he told Morel who noted same:-
15. Mr. Morel denied this and said only the rental was discussed and neither air-conditioning charges nor deposit were mentioned. Having heard the evidence of Wong and the three witnesses, including Mr. Morel, called by the defendant wherever there is a conflict of evidence between Wong and the three I prefer the latter three. Mr. Wong proved himself to be an unreliable witness to which I shall revert. I find at that meeting only the rental was discussed and that was why Morel came out with the figure of $8 being the average of $8 being the average of $7.50, $8, $8.50. 16. Pursuant to Morel's letter of 16th November, 1976 accepting a five year tenancy at $8 per square foot exclusive Wong wrote to his company's solicitors, copied to Air France, to prepare a tenancy agreement according to the following particulars:-
17. When Morel received a copy of this letter he instructed a Mr. Wei, the Administration Manager, to contact Wong about the air-conditioning charges and the deposit. Wei failed to make contact and instructed Mrs. Richardson to ring up Wong. She told the court that sometime towards the end of November 1976 on the instructions of Wei she rang up Wong to ask why the deposit was for three months and not two months. She was certain there was another matter over the intended new tenancy she spoke to Wong about but could not remember what it was. Wong told her "that was the way it was going to be and that was it". She relayed this to Wei who contacted Wong himself and inquired why air-conditioning charges at $2,557.50 against existing charges of $1,193.50 and a deposit of $81,840 against $13,640. Wong told Wei that these two items were not negotiable and in short Air France could take it or leave it. Wei told Wong, if that was his attitude he might as well tell his solicitor not to send a draft agreement to Air France and Wong replied that the draft agreement would be sent. By a letter dated 30th November, 1976 the plaintiff's solicitors wrote to Air France enclosing a draft agreement with the material terms set out above. Upon receipt, Wei again Rang up Wong about the air-conditioning charges and the deposit. Wong was adamant and replied in terms take it or leave it. Upon hearing of this Morel contacted a big property company, obtained an agreement for alternative premises and on 15th December, 1976 wrote to Wong in these terms:-
18. Wong never answered this letter but the plaintiff's solicitors did on the 15th January, 1977 alleging a breach of agreement and threatening to sue for specific performance. In the interregnum, I find the following facts:-
19. If Wong had been surprised by Morel's letter of 15th December, 1976 he in my view would undoubtedly have contacted Air France to inquire into the reason for the change of heart. He admitted Air France being an international airline was a prestigious tenant yet he could give no reason why he did not. He knew the reason, hence the advertisement on the 7th January, 1977 before the plaintiff solicitor's threat to Air France dated 15th January, 1977. Reverting to the credit worthiness of Wong, the plaintiff produced to the court 37 similar advertisements from 2nd February, 1977 to 9th November, 1977. It took the defendant to produce the advertisements prior to the 2nd February, 1977. The plaintiff's answer to my inquiry why the advertisements prior to the end of Air France's term, in particular the one dated 7th January, 1977 were not produced sounded hollow. Wong told the court he reported to the Management Committee on 11th January, 1977. He said the Management Committee was upset when he told them "Air France was arguing about the enlarged area occupied by the Franco units (air-conditioning units) and from all the evidence Air France used this as an excuse." Not a word was mentioned about air-conditioning charges or the three months' deposit to the Committee by Wong according to his evidence. Wong admitted that he spoke on the phone to a member of the staff of Air France, sometime towards the end of November 1976, but denied that it was about air-conditioning charges and the deposit. He said Air France tried to reduce the floor area by deducting the area occupied by the cabinets containing the Franco air-conditioning units. When this was put to Wei he said there was no discussion on the Franco units over the new tenancy for the matter of the area occupied by the Franco units had been resolved in 1968. This evidence was cogently supported by the advertisements "To let 550-3410 sq. feet." When Wong was asked why he advertised the defendants' premises (3410 sq. feet) on 7th January, 1977 he denied firstly it was the defendants' premises and when pressed said all the floors consisted of 3,410 square feet and when further pressed which floor was about to become vacant said the 9th floor which tenancy had still three months to run. The agreement for the 9th floor was produced which clearly showed that rent was based on a floor area some 200 square feet larger. When Wong was asked why this was so he had no answer whatsoever. 20. After exchanges of correspondence between the solicitors for the parties which were laboriously referred to at the hearing, the plaintiff's solicitors wrote to the solicitors of Air France on 29th January, 1977 that the plaintiff was prepared to waive the demand of 75 cents per square foot for air-conditioning and would charge 35 cents (the old rate) and waive the demand for three months' deposit. Mr. Chang argues on this that there was a binding agreement after Morel's letter of 16th November, 1976. The plaintiff's request for the air-conditioning charges and the deposit amounted to a repudiation by the plaintiff and Morel's letter of the 15th December, 1976 could not be read as an acceptance of that repudiation. The plaintiff had never insisted on the charges and three months' deposit - and I have found to the contrary - therefore the plaintiff was free to withdraw them prior to acceptance of repudiation by the defendants and the plaintiff did withdraw them by its solicitor's letter of 29th January, 1977 hence there was a binding agreement. 21. I do not accept this argument. On my finding, the first mention of the 75 cents per square foot for air-conditioning and three months' deposit which was an offer was refused by Wei over the telephone and confirmed by Morel in his letter of 15th December, 1977. There was, I repeat, never any agreement between the parties enforceable or otherwise. I do not have to go into the question whether in a contract of this nature a material term can be waived by the plaintiff (see Hawkins v. Price(1)). 22. I had given an oral judgment in this case but, unfortunately, no record was made and I did say to counsel if either party wanted a written judgment, I was prepared to give one and I have been so requested by the plaintiff. 23. At the end of the hearing I gave judgment for the defendant on the claim and judgment for the defendant on its counterclaim in the sum of $13,640 with interest at 8% per annum from 3rd February, 1977 both with costs. Representation: Denis Chang (F. Zimmern & Co.) for Plaintiff William Lane (Stevenson & Co.) for Defendant. (1) (1947) Ch. 645. |
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