Wise Stand Ltd. v. United Pentecostal Church of H.K. Ltd.

DCCJ019369/2001

DCCJ19369/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 19369 OF 2001

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Coram : H.H. Judge Muttrie in Court

Date of Trial: 16 - 18 December, 2002 & 27 January, 2003

Date of Judgment: 7 March 2003

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JUDGMENT

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1.The plaintiff was the landlord and the defendant the tenant of premises at No. 18 Water Street, Hong Kong. Their tenancy agreement dated 12 February 1998 was for a term of two years from 1 April 1998 to 31 March 2000, at a rent of $96,600.00 per calendar month. The defendant held over from month to month after the expiry of the tenancy agreement and finally left the premises on 13 June 2000. No rent was paid after 31 March 2000. The plaintiff now, after giving credit for the deposit of $193,200.00 claims for damages of $193,200.00, equivalent to two months' rent, and a further $5,000.00 in respect of reinstatement of windows after the removal of air-conditioners by the defendant.

2.The defendant avers that the plaintiff breached and repudiated the tenancy by carrying out major works of alteration to the premises between 21 March and 13 June 2000, which repudiation the defendant accepted by vacating the premises on 13 June and handing over the keys; alternatively the defendant surrendered the premises to the plaintiff on that date; or alternatively the defendant gave vacant possession of the premises to the plaintiff on that date. It further counterclaims for damages for repudiation of contract, breach of covenant of quiet enjoyment, derogation from grant and/or nuisance. The plaintiff pleads in reply that the defendant permitted it to carry out the improvement work and is estopped from claiming any loss or damage for the inconvenience of loss of quiet enjoyment or derogation of the grant of the tenancy.

3.The following matters are not in dispute, or are indisputable. The premises are office premises on the first and second floors of Tsui King Court which lies on the corner of Water Street and Pokfulam Road. The defendant used the premises as a church. The pastor, and chairman of the defendant's board of directors, was the Rev. Stephen Roy O'Donnell ("Mr. O'Donnell") and the congregation consisted mainly of Filipina domestic helpers. The defendant also had premises in Sheung Wan, which it used as a church for a Chinese congregation; the pastor of that church was the Rev. Samuel Ma Kin Keung ("Mr. Ma").

4.At the premises there is an entrance door in Water Street from which access was formerly gained to the first and second floors, and an entrance door on the second floor, to which access was gained from the pavement of Pokfulam Road by means of a walkway 1.3 metres wide. Some time in the course of the defendant's earlier tenancy of the premises, which commenced in 1995, the defendant had, with the plaintiff's consent, floored over the staircase opening on the second floor with metal slabbing. The unusable staircase from the first to the second floor was thereafter used for storage of the belongings of the church and members of the congregation.

5.On 18 November 1999 the defendant through its then solicitors, Messrs. Howell and Lo, made a "subject to contract" offer to the defendant to renew the tenancy at a rent of $80,000.00 per month. The plaintiff's solicitors, Messrs. Ho, Wong and Wong, of whom the plaintiff's director Mr. Duffy Wong Chun Nam ("Mr. Wong") is the senior partner, counter-offered to renew at a rent of $88,000.00.

6.In the same letter the plaintiff advised the defendant of its intention to carry out improvement work to the premises by widening the walkway at the Pokfulam Road entrance to 3.2 metres, and that as a pre-condition to this work the Building Authority required incidental works to be carried out including:

1) the steel platform slabbing over the staircase void on the 2/f to be removed;

2) the staircases, at G/F, 1/F and 2/F leading to the Water Street to be removed and covered by concrete slabbing, and

3) the air conditioner plant rooms to be re-instated.

7.The plaintiff's solicitors enclosed a copy of the Building Authority's letter and the approval plan and further indicated that the plaintiff wished to include a clause in the new tenancy agreement to allow it to carry out the improvement work during the new term.

8.The defendant's solicitors on 8 December 1999 replied with an offer of rent of $84,000.00 per month and asking for a break clause to be inserted to give the defendant the option to terminate the new lease on 30 days' notice. They continued:

"When the above matters have been resolved our client will be in a position to advise you with regard to a date for the work on the walkway to commence."

9.The plaintiff's solicitors replied on 9 December 1999 agreeing in principle the figure of $84,000.00 but not the proposed break clause and asking for a convenient date to start the work.

10.At that time Mr. O'Donnell was out of Hong Kong, and Mr. Wong of the plaintiff had some communication with Mr. Ma who was standing in for Mr. O'Donnell in his absence. On 6 December Mr. Ma sent an e-mail to Mr. O'Donnell in the following terms:

Bro. O'Donnell,

To my understanding, the story is this. The landlord applied to the Works Bureau for widening the sidewalk outside our entrance. In the process of application, the Government found out that we had used a slab of steel to cover up the staircase of the 2nd floor which is not in accordance with the original floor plan of the building. So, before permission can be granted for the works outside the entrance, a requirement was made to the landlord to remove the unlawful structure. .

In order to maintain a better shape of the building inside, the landlord had made another application to rebuild the inside building also, which is to remove the steel stabbing and cover the staircase with concrete floor. Also, the staircases on the 1st floor and ground floor which leads to Water Street will be removed and covered with concrete floor. To my understanding, these works had been approved by the government.

I personally talked to the landlord's solicitor. asking him would the works leave the building the same shape as it is now, and the answer was positive. I asked about the air-con room also. The lawyer said that according to the original floor plan a air-con room (one on each floor) must be built. I saw the floor plan they sent to me and found that the room should be built beside the toilets. I think it is the same place as the store room on the 1st floor. The lawyer said that this is just something to meet the requirement of the floor plan only. so a regular room with any kind of air-con operating in it would serve the purpose. But I do not know if they would be responsible for the building of the room.. and this I would ask them next time I talk to them.

The landlord had sent us two letters. The second one was asking when would be possible for them to start the works inside the building. Is there any question or suggestion?

The landlord also sent us copies of letter from the government and their contractor. Would you like a copy? I can sent them to you by DHL or Speedpost as long as you give me an address.

Samuel

11.Mr. O'Donnell replied on the following day:

Brother Ma,

Regarding the renovations that are necessary. Before the landlord can begin work on the stairwell, we have a lot of stored items that belong to the

church plus personal belongings of some members which need to be removed. Therefore, we need time to make announcements of this nature.

If the landlord accepts our offer, we can then begin to announce for everyone to take their things out. We will probably need 4 weeks to allow members to find another storage facility for their property.

Brother Sanders, in order for the government to approve the entrance widening on Pok Fu Lam, they said the landlord must also take care of some renovations on the first and second floors. What these renovations have to do with the entrance renovation is beyond me but we'll have to live with it. We are

first waiting to sign a lease with the landlord before we allow them to begin the work. If we have to move in April, then they can wait to make the renovations after we are gone.

Regards,

Brother O'Donnell.

12.Mr. O'Donnell sent Mr. Ma a further e-mail on 13 December 1999, saying as follows:

Dear Bro. Ma,

According to your e-mail, you say that the landlord will replace the steel platform with a concrete one. Does this mean that they are or are not taking out the stairwell? If they take the stairs out then we have to find a storage place for all the belongings because the people will not have enough time to remove everything.

However. If they are not taking the stairs out then we can store everything in a corner somewhere while they do the work.

Regardless, let Brother Sanders know that you have communicated with me about this so that we can try to co-operate with the landlord's request regarding the 20th.

Please remind the contractors though that the job must be finished before the weekend.

Regards,

Brother O'Donnell.

13.Following these communications Mr. Ma gave Mr. Wong permission at least to come in and take out the steel slabbing. The plaintiff then sent in its contractor, Cube Construction Ltd., whose employees, under that company's foreman Mr. Lai Wai Ip removed the steel slabbing, which took from 3 to 7 January 2000.

14.The plaintiff's architects, James Lau & Associates Ltd., sent a Letter of Intent to Cube Construction Ltd. on 10 February 2000, accepting the latter's tender for the improvement works at a lump sum fee of $428,098.00. The work was to be done in 50 calendar days including public holidays but excluding days with inclement weather and was to start within 7 days from the date of issue of the architect's instruction. The instruction followed on 1 March 2000.

15.There is some dispute as to whether work was done in the premises between 7 January and 21 March, the date on which, according to Mr. Lai, his men started it. The evidence from Mr. O'Donnell and Miss Lumbaca, the church secretary, on this is rather vague, but Mr. Lai is clearer and he has produced a document from his company which shows that the work commenced on 20 March and finished on 26 May 2000. Cube Construction Ltd. reported to the architect that it had finished all the works in accordance with the contract on 26 May 2000, though it appears that some further work involving removal of a beam at the Pokfulam Road entrance had to be done after that, and was still being done on 13 June 2000.

16.The work was carried on from Mondays to Fridays only, leaving the premises free for church services and activities on Sundays. However, the defendant's witnesses say, and there is nothing to contradict this, that although no activities were carried on on Mondays, from Tuesday to Friday the premises were open to those of the congregation who could not take a day off work on Sunday. The defendant operated a service and Bible classes on Wednesdays to Fridays, for about 20 persons each day, and on Saturdays for about 50 persons, and on these days the premises were also open for the members' social activities. While the work was going on, these religious and social activities and in particular the Bible classes had to be held at Mr. Ma's church premises in Sheung Wan.

17.During this time, Mr. Christian Bullen, who trades as Hong Kong Multi Listing Group, an estate agency, had come into the picture. On 21 March 2000 Mr. Bullen wrote to the plaintiff's solicitors on the defendant's behalf, offering to lease the property for two months from 1 April 2000 at a rent of $60,000.00 per month. The plaintiff's solicitors on 23 March counter-offered a lease at a rent of $84,000.00 per month for a period of two months which they changed the next day to six months. On 1 April Mr. Bullen replied with an offer of $64,000.00 for a period of one month with the following special conditions:

This offer to rent or occupy the said premises is made strictly on a Without Prejudice basis. The tenant has brought to the attention of the Landlord on several occasions the nuisance and interruption which the Landlord's workman have caused to the tenant's operations and enjoyment of the rental premises. The Tenant reserves all his rights in the complaint or in any other matter whatsoever.

18.The plaintiff's solicitors on 3 April 2000 refused this offer. They sent reminders to the defendant for the rent payable at the end of April and the end of May, and on 23 May 2000 wrote to the defendant's solicitors demanding payment of the rent for April and May. The defendant's solicitors were, however, no longer instructed.

19.The defendant in the meantime had found new premises which it leased from 31 May 2000. The defendant moved out of the suit premises over the weekend of 11-12 June 2000 and on 13 June 2000 at the premises the keys were handed over to Mr. Wong. This was followed on 14 June by a letter from the plaintiff's solicitors to the defendant demanding payment of four months' rent, i.e. up to 31 July 2000 plus the cost of complete reinstatement of the premises. The plaintiff locked up the premises and changed the locks. The defendant thereafter sought to make an appointment to get in so as to obtain a quotation from its contractor for replacement of glass in windows left empty after the removal of air-conditioners but in fact this was never achieved. Subsequently Cube Construction Ltd. covered the window voids at a cost of $5,000.00. The plaintiff through solicitors went on to demand a total of $592,438.00 in rent, management fees and reinstatement costs, minus the deposit of $193,200, but then on 21 May 2001 sued the defendant in the Small Claims Tribunal for $50,000.00, for arrears of rent up to 13 June 2000 less rental deposit, repair of window panes and loss of use during repair for one day. The defendant counterclaimed for damages for loss of use of the premises while the improvement works were in progress. The matter was later transferred from the Small Claims Tribunal to the District Court.

The Issues

20.There is no dispute that the defendant held over after the expiry of the term of the lease. The rent was unpaid from the beginning of April 2000, though the plaintiff through solicitors had reminded the defendant that the terms of the existing lease would continue, particularly as to rent, and had sent reminder letters to the defendant on 24 April and 22 May 2000.

21.The first issue is whether the plaintiff breached and repudiated the tenancy by doing the works and whether the defendant accepted such repudiation by handing back the keys on 13 June 2000. If it did not, the next issues are whether the defendant surrendered the premises, or alternatively gave vacant possession, on 13 June 2000, and whether this ended the defendant's liability to pay rent. So far as the counterclaim is concerned the issues are whether the plaintiff derogated from the grant of the tenancy by having the improvement works done, and whether this was done without the defendant's permission or whether such permission was obtained by misrepresentation. If that can be established the question of quantum of damages will then arise.

22.So far as the alleged breach and repudiation of the tenancy is concerned, it is necessary first to look at the terms of the lease. Clause 3 provides:

3. Landlord's Covenants

The Landlord hereby agrees with the Tenant as follows:

3.1 .....

3.2 Quiet Enjoyment

That the Tenant (paying the rent hereby agreed to be paid on the days and in manner herein provided for payment of the same and observing and performing the agreements stipulations terms and conditions here contained and on the Tenant's part to be observed and performed) shall peaceably hold and enjoy the Premises during the Term without any interruption by the Landlord or any person lawfully claiming under or in trust for the Landlord.

23.The defendant's obligation to pay rent is set out in clause 2.1. It is not expressed to be subject to or conditional on compliance by the plaintiff with all or part of its obligations as landlord. The lease contemplates the obligation to pay rent as operating independently from the other contractual obligations. At common law, the covenant to pay rent has been regarded as independent of the other covenants or obligations under a lease, including the covenant for quiet enjoyment; Edge v Boileau & Ors, [1885] 16 QB 117; Taylor v Webb [1937] 2KB 283.

24.According to the witnesses, what actually happened was this. Mr. Lai and his men were in the premises in January to take out the steel slabbing at the 2nd floor. Obviously, this reduced the floor space available on that floor and it would also have had an effect on the articles stored on the staircase and stairwell below. It does not appear that any work was done after that until 20 March. Mr. O'Donnell says in one of his statements that when he came back to Hong Kong on about 19 February, he found that he had lost about 40 seating places as a result of the workmen's wooden partitions. He also referred to unbearable construction noise and debris. In oral evidence he referred to work commencing on 20 March and going on for 2 months. Mr. Lai says that the work commenced then. Miss Lumbaca's photographs show work in progress at that stage, when the men were putting up hoardings round the staircases. I have already referred to Mr. Lai's evidence and the document from his company which shows the dates and progress of the work. I accept that the work went on from 20 March to 26 May 2000.

25.In this time, as I have indicated, the church had in effect to transfer its weekday operations to Mr. Ma's church. Mr. O'Donnell and Miss Lumbaca, however, carried on working in the premises. There is some difference between them and Mr. Lai as to the extent of the noise, dust and so on caused by the work. Mr. O'Donnell says that he had an office at home, and often went there to escape from it. Miss Lumbaca who also had an office within the premises found that there was a lot of noise. There were also complaints from Mr. O'Donnell about workmen using foul language, working with their shirts off and smoking in the church premises. In effect, during the week the church was transformed into a building site. Though there were hoardings round the staircase, and Mr. Lai claims that most of the work was done inside, it was inevitable that some would be done outside. Also workers would have to bring in ready-mixed concrete from outside, to the hoardings, while the concrete was being poured. At the weekends, there was a lot of dust left; the church had to be put back into shape for the Sunday services, and most of the work for that seems to have fallen on Miss Lumbaca. As well as space being taken away from the available congregation area by the hoardings, it appears that space was taken up by the stacking of planks and bags of cement and sand round the walls. The space was, it appears, already limited having regard to the size of the congregation; Mr. O'Donnell says that his average Sunday congregation was 600, but that they could not all sit together at one time; it was necessary to hold services for three different groups, one at 10 a.m. and two at 2 p.m., on the two floors. The removal of space for 40 persons or so would obviously make a difference to this.

26.Does this amount to a breach of the covenant? The defendant was put to temporary inconvenience. There is authority that this does not constitute a breach of the covenant. Per Lord Lindley. MR in Manchester, Sheffield and Lincolnshire Railway Co. v. Anderson [1898]:

I take it that a mere temporary inconvenience caused by a lessor, not in depriving his tenant of a right of way, but in rendering his access less convenient than it was, is not a breach of covenant for quiet enjoyment. A temporary inconvenience which does not interfere with the estate or title or possession is not, to my mind, a breach of covenant, nor is there any case that goes anything like the length required to show that it is.

27.The effect of the covenant was explained by Pearson LJ in Kenny v Preen, [1963] 1 QB 499, as follows:

The implied covenant for quiet enjoyment is not an absolute covenant protecting a tenant against eviction or interference by anybody, but is a qualified covenant protecting the tenant against interference with the tenant's quiet and peaceful possession and enjoyment of the premises by the landlord or persons claiming through or under the landlord. The basis of it is that the landlord, by letting the premises, confers on the tenant the right of possession during the term and impliedly premises not to interfere with the tenant's exercise and use of the right of possession during the term.

28.In that case the court went on to hold that the covenant extends to any conduct of the landlord or his agent which interferes with the tenant's freedom of action in exercising his rights as a tenant.

29.In the present case there was, or so it seems to me, no interference with the tenant's exercise and use of the right of possession and no interference with its freedom of action in exercising his rights as a tenant. This was not a case where, for instance, the landlord denied the tenant access to the whole or part of the premises, or even, as in Kelly v Preen, used bullying tactics to remove him. The defendant was in possession throughout. No part of the premises were barred to it. It could have denied entry to the workmen at any time.

30.The plaintiff's case is that the work was done with the consent of the defendant. There can I think be no doubt that the defendant gave consent for the work to be done in January. Mr. Wong's evidence was that he thought he had spoken to Mr. Ma about starting the work in March, because although the architect had issued instructions to start by 8 March, the work did not start till 20 March; Mr. Ma had told him that Mr. O'Donnell did not want the work to start until after the defendant had moved out, but he did not know if or when it would; so after discussion there was a compromise, that the work would only be done during office hours from Monday to Friday.

31.Mr. Ma denied having had any such conversation. According to him, he had referred everything to Mr. O'Donnell when the latter was out of Hong Kong, and once Mr. O'Donnell came back, he had no more to do with it. Nevertheless, there must have been communication between Mr. Wong and someone on behalf of the defendant, because there is no doubt that the work was put back, and there is no doubt that there was agreement that the work would not be done on consecutive days but only on weekdays.

32.Although it is the defendant's case that no permission was given, or, if it was, it was obtained by misrepresentation, Mr. O'Donnell did not in oral evidence deny that permission was given. In answer to cross-examination, Mr. O'Donnell said that he understood from what was written in the e-mail of 6 December 1999 that the stair would be demolished, the slabbing removed and concrete slabbing put in, and that he knew that this would generate noise and inconvenience. He had objected, in the sense of writing to Mr. Ma that he could not understand why the landlord wanted to do the work, if they were going to move out at the end of March; but he said that the defendant wanted to comply with the landlord's wishes. The landlord said that it was important and the defendant trusted him. He said that he had given "permission to comply with the wishes of the landlord; not specifically to do the work" and that though he did not give express permission to say that they may come in "I gave direction to help the landlord to do what he needed to do." Later he agreed that through toleration, the defendant had let the plaintiff in to do the work albeit reluctantly and with "a lot of whining going on". In spite of this casuistry I do not see how this differs, in fact, from giving permission to come in and do the work.

33.There is no dispute that the work was done only during office hours on weekdays. It is clear from Mr. O'Donnell and Miss Lumbaca that they were both present, and in the premises, at least some of the time when the work was going on. The defendant certainly took no objection to the work going on though there were complaints about some aspects of it. Miss Lumbaca, it appears, let the workers in, at least on some occasions.

34.I do not see how the defendant can say that the work was done without its consent. It is true that Mr. O'Donnell says that he did not know how long the work would take; this seems to be the basis of the allegations in the counterclaim of misrepresentation by Mr. Wong as to the extent of the works. In fact there does not seem to be any specific evidence of a positive representation by Mr. Wong that the works were necessary, would be completed within a short period, and would cause only minimal disturbance to the defendant. There is equally no evidence that Mr. Wong told the defendant how long, according to the architect, the work was supposed to take, i.e. 50 days (without allowing for working only 5 days per week).

35.Mr. O'Donnell knew what was to be done as early as December. Mr. Ma may have got some of the details wrong but the gist of the work to be done was set out in his e-mail. No one, I think, could expect the job of taking out a staircase and concreting over the voids on two floors to be a quick job or to cause minimal disturbance. It was obviously a big job. Mr. O'Donnell must have known that. If he did not know the details he was in a position to ascertain them, directly or through the defendant's then solicitors, Messrs. Howell and Lo.

36.I do not see that it can be said that the work was done without the defendant's permission or that such permission was obtained by false or negligent misrepresentation on the part of Mr. Wong. To put it at its highest, he did not specifically tell the defendant how long the work would take; but the defendant did not ask. It simply allowed the plaintiff to go ahead, in circumstances where it did not need to do so.

37.It is also argued that any permission was conditional on agreement of the rent and break clause put forward in the letter of 8 December 1999 by the defendant's solicitors. There is in my view nothing in this. There never was any agreement on these matters but nevertheless the defendant let the plaintiff in without insisting on it.

38.If the temporary inconvenience caused by the work amounted to a breach of the covenant I do not see how the defendant can complain of it in circumstances where it was done with the tenant's informed consent, even if that consent was reluctant.

39.These are perhaps matters which go more to the counterclaim. It is difficult to see in any event how, if the plaintiff did breach the express covenant for quiet enjoyment and/or the implied covenant not to derogate from grant, how this could, in the circumstances, amount to repudiation by it of the tenancy. It did not seek to remove the defendant as tenant; it did not interfere, except temporarily and with the defendant's consent, with the defendant's actual possession; and it did not seek to interfere in any way with the defendant's right of possession.

40.In any event, I am certainly not satisfied that, if there was such repudiation, and I do not think there was, the defendant accepted it by vacating the premises on 13 June. In the first place, by that time the work was finished except for the beam removal I have mentioned. On the evidence of Miss Lumbaca and Mr. Ma the weekday Bible classes were back to normal in June. In the second place, as Mr. O'Donnell admitted, he had been looking for larger premises. He wanted premises which would hold his whole congregation at once, and not require split services, and he wanted to pay a lower rent. He started looking for such premises in February and ultimately he found them. He signed a lease for those premises on 31 May 2000 for a term of three years at a rent of $59,000.00 per month, plus management fees. It was put to him in cross-examination that the main reason for moving out was that he had found premises with lower rent and this he accepted though he maintained that the issue of construction work was still one of the factors. Obviously, it could not have been a real factor, once the construction work was finished, as by then it was except for the matter of the beam at the Pokfulam Road entrance.

41.It may also be inferred from the terms of Mr. Bullen's letters, proposing first a tenancy for 2 months, and then a tenancy for 1 month,, with rent to be paid from the existing deposit, that the defendant's position after 1 April was to keep its options open and protect its position while looking for a new tenancy.

42.I conclude that the plaintiff did not repudiate the tenancy, nor did the defendant accept any repudiation of it. It is common ground that the defendant was holding over. The defendant's obligation to pay rent after 31 March 2000 continued. Clause 7 of the lease is the usual clause relating to the deposit, which provides that it is for the purpose of securing the tenant's performance, and is only to be refunded within 7 days after the determination of the lease and delivery of vacant possession. The defendant would have no right to require the plaintiff to use the deposit money for the rent for the months of April and May. In the normal way, the tenancy could only be terminated, on the tenant's part, by one month's notice, under section 122(1) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Since the tenancy was held over from month to month, the notice would have to be for a full calendar month. No notice was given before 13 June. The earliest termination date would therefore be 31 July 2000.

43.The defendant however says that on 13 June 2000 it surrendered the premises, and the plaintiff accepted such surrender, or alternatively whether the defendant gave vacant possession. This ended the defendant's liability to pay rent. Since the plaintiff has given credit for the deposit money the defendant now says that at most it owes rent for the period from 1 to 13 June 2000.

44.I will deal with the second alternative first, because counsel for the defendant approached it in that way. It was argued that since the defendant gave up vacant possession on 13 June, no rent was payable thereafter. The plaintiff relies on section 122(1) of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 which provides:

(1) (a) Save where vacant possession is given up or where a tenant surrenders his tenancy in exchange for a new tenancy no tenancy, whether existing on 14 April 1962 or created thereafter, shall cease or be determined without a written notice of termination being served by the landlord or tenant on the other party.

45.It is argued that "vacant possession" exists where the tenant moves out and the landlord is able to enjoy the premises. That is enough to determine the tenancy. That proposition on its own would mean that any tenant may leave the premises and hand over the keys to the landlord, and so bring the tenancy, and all his liability for rent or mesne profits to an end. That cannot be right. If it were so, there would be no need for a doctrine of surrender by operation of law. It seems to me that this provision must be intended to cover the situation where vacant possession is given up and accepted by the landlord; in other words where there has been a surrender.

46.The defendant also relies on express surrender or surrender by operation of law. There is no evidence of acceptance of express surrender. The real question must be whether there was a surrender by operation of law. That occurs where the parties act in a way which is inconsistent with the continuation of the tenancy, and implies that the tenancy has been surrendered. If the tenant gives up possession the surrender is only complete if the landlord takes possession in such a manner as to estop him from denying that the tenancy is at an end; see, e.g., Oastler v Henderson [1877] 2 QBD 575, CA.

47.The facts are that the defendant moved out of the premises on 11 June, and then told the plaintiff that it wished to surrender. Mr. O'Donnell and Mr. Bullen met Mr. Wong at the premises on 13 June. There was a heated exchange. It appears that Mr. Wong was angry. He says that the others threw the keys on the floor but they deny that. In any event, Messrs. O'Donnell and Bullen left the keys at the premises and went away. However the following day Mr. Wong wrote a long letter to the defendant, saying that the state of the property was not acceptable and that the plaintiff could not accept the surrender of the property without re-instatement, and claiming that the desertion of the property without reinstatement was a breach of the tenancy agreement. He also said that as no vacant possession had been delivered up to the plaintiff, the defendant remained liable to pay rent, rates and management fees until reinstatement work had been completed. He demanded rent up to 30 June, as well as reinstatement costs to be quantified.

48.Miss Lumbaca says that the contractors later let her into the premises, but she found them padlocked two days after the defendant left. Mr. Wong agreed that he had immediately padlocked them. In effect, if the defendant had wanted to get in, it could not.

49.Mr. O'Donnell wrote on 19 June asking for an appointment to enter, so as to get a quotation for reinstatement of windows where air-conditioners had been removed. On 21 June Mr. Wong wrote to him with a quotation for reinstatement works, and agreed to allow the defendant's contractor into the premises on 22 June, so that the defendant could also obtain a quotation. According to Mr. Wong, he later found out that someone had gone to the premises but not to make a quotation; they had removed the air-conditioner cages. He would not have let the defendant in to do any work. Subsequently another appointment was requested and he refused it. In cross-examination he was asked why, if he was not accepting the surrender, he would not let the defendant come in to reinstate the premises. His answer was "Why should I, if they are not paying rent?".

50.There is some dispute about whether or not anyone from the defendant actually went into the premises after 13 June. Mr. O'Donnell said in a statement that his contractor was unavailable on 22 June, and did not go in, and that all requests were thereafter refused In oral evidence he said that everything had been taken out on 13 June. He did not remember air-conditioning cages; and if they were taken out later it was done without his knowledge. What is not in dispute, however, is that after 22 June, any further requests by the defendant for access to the premises were refused.

51.There is no dispute that Mr. Wong advertised the premises for re-letting at the end of May and that before 11 June, and indeed while Mr. Lai was in the premises, potential future tenants came to inspect them.

52.The question therefore is whether, and if so when the plaintiff took possession in such a manner as to estop it from denying that the tenancy was at an end. There are, I think, three elements in this; padlocking of the premises; the advertisement for re-letting at the end of May, and the refusal by the plaintiff to allow any entry after 22 June.

53.Mr. Wong says that he padlocked the premises for security. It has been held that where a landlord changed the locks with a view only to securing the premises and keeping them in repair he does not accept possession so as to effect a surrender; Relvok Properties Ltd. v Dixon, (1972) 25 P&CR 1. Of itself therefore the padlocking should not have amounted to a sufficient acceptance of possession.

54.As to the advertisement of the premises, it is to be noted that in Oastler, employment of an agent and advertisement of the premises, and even temporary occupation of part of them by the landlord's servants was held not to be sufficient for acceptance of surrender. However in Proudreed Ltd. v Microgen Holdings plc 72 P&CR taking the key, showing the premises with a view to letting them, knowing the tenant to be insolvent, and putting up a board announcing that the premises were to let was held to be evidence of an election on the landlord's part to assent to the tenant's proposal of surrender. I am not sure that in this case advertisement and allowing prospective tenants would be sufficient. It is further not clear whether anything more than advertising was done after the defendant had purported to surrender the premises on 13 June. Anything done before that could not be construed as acceptance for the offer of surrender had not yet been made. At best it would indicate an intention to put a new tenant in as soon as possible; and the act of putting in a new tenant would constitute acceptance of any surrender made before that.

55.However, it is clear from the evidence of Mr. Wong that after 22 June 2000 he had no further intention of letting the defendant into the premises, for any reason. Indeed he did not let them in when they wanted to enter. It seems to me that this showed that he had decided that the matter should be at an end. In the circumstances of the present case, refusal to let the tenant enter after 22 June, coupled with the attitude he took, that there was no reason to let them in if they would not pay rent, seems to me to be a sufficient indication that he intended to terminate the lease in circumstances in which it would be inequitable for him to say that there had been no surrender.

56.It follows that the defendant should be liable for rent at $96,600.00 per month and management fees at $10,866 per month for the period from 1 to 22 June 2000. I calculate the figure at $78,808.40.

57.As to the claim for reinstatement of the windows at $5,000.00, Clause 2.6 of the lease obliged the defendant to reinstate the premises to their original state on vacating the same. This would obviously cover the closing up of window voids where air-conditioners had been removed. The defendant should have done that. Later surrender would not affect liability for it. In the circumstances the plaintiff must succeed on this claim, and $5,000 will be awarded.

58.I turn to the defendant's counterclaim for damages for repudiation of contract, breach of covenant of quiet enjoyment, derogation from grant and/or nuisance. The plaintiff's defence is that the defendant having permitted the plaintiff to carry out the work is estopped from claiming any loss or damage for inconvenience, loss of quiet enjoyment or derogation of grant. I have already found that the plaintiff did not repudiate the tenancy and that the defendant gave the plaintiff permission to enter and do the works and that such permission was not obtained by false or negligent misrepresentation. No doubt the defendant was put to inconvenience, but it let that happen, in circumstances in which it could have refused, or made conditions.

59.The defendant says that the requirements of estoppel are lacking; the plaintiff did not change its position to its detriment in reliance on any clear and unequivocal promise by the defendant which was intended to affect the legal relations between them. It is further argued that the defendant never expressly waived its right of action for valuable consideration; mere acts of indulgence do not amount to waiver. It is further argued that the defence of volenti non fit injuria cannot be substantiated because the defendant did not have full knowledge of the nature and extent of the risk it ran.

60.On my findings the defendant must have known that a big job was in contemplation, and if it did not know the exact details, it could have found them out. Nevertheless it let the plaintiff go ahead. It seems to me that the defendant in doing so represented to the plaintiff that it had no objection to the work being done, and by implication would make no claim. The plaintiff altered its position in reliance on that representation by having its contractor go in and do the work. I do not think it matters that the plaintiff had already engaged the contractor on 10 February to do the job; the start date depended on the architect, and even after the architect gave his instruction, the start was still put back to 20 March. Mr. Wong said that he thought he could have got a further extension of time. There is no evidence as to whether he would have had to pay compensation for it. What matters is that in reliance on the permission the plaintiff had the work started; once that was done it was committed, to its own prejudice.

61.If this is wrong it seems to me that volenti non fit injuria would in any event apply. By giving permission the plaintiff impliedly agreed to waive any claim against the plaintiff which it might have had. Its agreement was voluntary; it was under no compulsion and could have refused. It had on my findings, or ought to have had full knowledge of the nature and extent of the risk it took.

62.I conclude that the defendant's counterclaim must fail.

63.There will be judgment for the plaintiff in the sum of $83,808.40 with interest at the best lending rate plus 1% from the date of the writ to the date of judgment and thereafter at the judgment rate, and costs to be taxed if not agreed. The defendant's counterclaim is dismissed with costs to the plaintiff to be taxed if not agreed.

Representation:

Mr. J. Kun of M/S Ho, Wong & Wong for the Plaintiff.

Mr. James Thomson instructed by M/S Arculli and Associates for the Defendant.