Amerex International (HK) Ltd v. United Investment & Finance (HK) Ltd

HCA000899/1975

IN THE HIGH COURT OF JUSTICE

ORIGINAL JURISDICTION

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ACTION NO.899 OF 1975

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Coram: Li, J.

Date of Judgment: 26th November, 1976 at 3.50 p.m.

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JUDGMENT

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1. This is an action for breach of contract by Amerex International (HK) Limited (hereinafter referred to as the plaintiff) against United Investment & Finance (HK) Limited (hereinafter referred to as the defendant). The plaintiff's case is that at all material times it was a tenant of, inter alias, the rooms 702-706 of Tak Shing House owned by the Tak Shing Investment Co. Ltd. (hereinafter referred to as the landlord) for a period from the 1st November 1973 to the 31st October 1975. By November 1974 the plaintiff was anxious to move out of part of the premises and to give up in particular rooms 704, 705 and 706 (hereinafter referred to as the rooms). An arrangement was therefore made with the landlord that the plaintiff was allowed to vacate the premises if the plaintiff could find a tenant who was acceptable to the landlord and who was willing, ready and able to enter into a formal tenancy agreement to take over the rooms on the 11th November 1974 the plaintiff agreed orally with the defendant through a Mr Lawrence WOO that as from the 1st January 1975 the defendant would take over the rooms and that the defendant would enter into an agreement with the landlord for the purpose. It was further agreed that if the plaintiff was able to vacate the rooms on or before the 1st December 1974, the defendant would reimburse the plaintiff as to half of the month's rent in December. Pursuant to this oral agreement a provisional agreement was signed between the landlord and Mr. Lawrence WOO on behalf of the defendant. Further, an written agreement for the purchase of fixtures and fittings and 3 air-conditioners already installed in the rooms was entered into by the plaintiff and Mr. Lawrence WOO on behalf of the defendant. These two agreements are respectively document 2 and document 3.

2. It is alleged by the plaintiff that there is an implied term in the oral agreement that if the plaintiff should vacate the rooms on 1st December 1974 the defendant would take over at the latest as from 1st January 1975. In reliance on such agreement the plaintiff duly vacated the rooms on or before the 1st December 1974. However, the defendant never took up the tenancy of the rooms at all. As a result, the plaintiff had to pay rent for the rooms, not only for the month of December, but also for the months of January, February and later on had to settle with the landlord by paying compensation so as to enable the plaintiff to terminate the tenancy of those rooms before the expiration of the plaintiff's tenancy agreement. It is alleged by the plaintiff that there is a breach of the oral agreement on the part of the defendant, and the plaintiff claims various damages as listed in the Statement of Claim in paragraph 10 and 11.

3. The defence case is that on the 11th November, 1974 the provisional agreement with the landlord was entirely a matter between the landlord and the defendant and was conditional precedent to any obligation that the defendant might have towards the plaintiff. The oral agreement between the plaintiff and the defendant was entirely subject to the terms of the provisional agreement in document 2. It is denied that there had been any oral agreement with the plaintiff at all as set out in the plaintiff's Statement of Claim. It is further alleged by the defendant that there is a complete lack of certainty in respect of the term of tenancy or the amount of rental to be paid in the oral agreement between the plaintiff and the defendant. It is also contended by the defendant there is a lack of consideration from the plaintiff. Further and in the alternative, it is alleged that there was no sufficient memorandum in writing or evidence in writing to satisfy the provisions of section 5(1) of the Law Reform Amendment (Consolidation) Ordinance. As such, whatever oral agreement that there might be, which is denied, is entirely unenforceable. Finally in the last resort it is pleaded by the defence that Mr. Lawrence WOO who entered into the contract, the provisional agreement, has no authority to do so at all. However, in paragraph 10 of the defence it is admitted that the agreement in document 3 was entered into between the plaintiff and the defendant although the whole agreement in document 3 is subject to the terms of document 2, the provisional agreement, which is a condition precedent. In reply the plaintiff joins issue with the defendant and pleads that whatever might be the case, there had been part performance on the part of the plaintiff and the parties.

4. Having regard to the pleadings the issue appears to be as follows:-

5. These are the questions relating to the question of liability, and I shall, if necessary, deal with the question on quantum of damages later.

6. On the evidence before me I find the following facts:

7. In 1974 the plaintiff was a tenant of the rooms including other rooms in Tak Shing House owned by the landlords. Such tenancy had a period of two years to run as from the 1st November, 1973. Thus in September 1974, the plaintiff had a remaining term of tenancy of approximately thirteen months. The plaintiff then was anxious to vacate and surrender part of the premises they occupied in Tak Shing House including the rooms. There was negotiation between the plaintiff and the landlord as to the terms of surrender by the plaintiff. It was finally narrowed down to two alternatives. One was that the plaintiff would have to pay very heavy compensation. Alternatively, the plaintiff had to find a new tenant who was ready, willing and able to enter into a tenancy agreement in the terms satisfactory to the landlord. The tenant must also be approved by and acceptable to the landlord. The plaintiff, finding the payment of compensation a bit burdensome, started to advertise for tenants to take their place. Around late October or early November one Lawrence WOO who is an employee of the United Indo-Singapora Corporation (Private) Ltd., which is a Singapore company and owned by one Peter WONG with his wife, with himself acting in the capacity of Managing Director, came to Hong Kong. No doubt Mr WOO was an employee of United-Indo. The defendant company was oned by the same Mr Peter WONG of Singapore and his four children. Mr WONG was also Managing Director of the defendant company which had no office in Hong Kong except that its registered office was situated in the office of the company's auditor, Coopers & Lybrand in Shell House.

8. I also find that both United-Indo and the defendant company may be called family companies with one dominating shareholder in the person of Mr Peter WONG who was Managing Director of both companies. Mr WONG sent Mr WOO to look for office premises for the defendant company in November, 1974. I also find that Mr WOO on his arrival represented himself to Mr WONG Yau-cheung of the plaintiff as an officer of the defendant. I observe that Mr WOO did so because the invitation card he produced had the name of not only United-Indo-Singapora Corp. (Pte.) Limited, but also United Investment & Finance (HK) Limited which is the title of the defendant. Mr WOO then entered into an oral agreement as alleged in the Statement of Claim, that is, to take over the rooms. This, I find, has been proved to my satisfaction on the evidence of Mr. Y.C. WONG, WONG Yau-cheung. In the course of so doing, Mr WOO also signed an agreement with the landlord, which is entitled the provisional agreement. This is evidenced in document 2. The provisional agreement is in these terms:

It is dated 11th November 1974. There is a note to the effect that: "This Provisional Agreement is to be superseded by the formal Tenancy Agreement and should be returned to the Landlord on the signing of the formal Tenancy Agreement."

9. This, I find, is signed pursuant to the oral agreement between the plaintiff and the defendant. Apart from this, there is another agreement signed between the plaintiff and the defendant in document 3. It reads:- TO : AMEREX INTERNATIONAL (HK) LTD.

10. In consideration of your agreeing to release to us Rooms 704, 705 & 706 of Takshing House, Des Voeux Road, C. Hong Kong on or before 31 December, 1974, we hereby agree to pay you HONG KONG DOLLARS SIX THOUSAND ONLY (HK$6,000) as consideration money for the Lightings, Floor Ceilings currently available with the above rooms and the reception counter facing the lift lobby at Room 704 together with purchase of following three (3) units of air-conditioners:-

11. Dated this 11th day of November, 1974.

It is also signed by Lawrence WOO with the title UNITED INVESTMENT & FINANCE (HK) LIMITED above his signature.

12. I find that having signed these documents and having agreed with the plaintiff, the defendant took no further step in performance of the agreement. The plaintiff, relying on the agreement vacated the rooms on the 1st December, 1974. Nothing was heard until the 13th December, 1974 when Lawrence WOO wrote to Takshing Investment Co. Ltd. with carbon copy to the plaintiff in these terms:

13. This letter was written by Lawrence WOO in his purported capacity as Financial Assistant. The letter paper has the letterhead of United Investment & Finance (H.K.) Ltd. printed on it. However, before this letter was received either by the landlords or by the plaintiff presumably, there had been a long-distance telephone call between Mr. WONG Yau-cheung of the plaintiff and Mr Peter WONG, the Managing Director of the defendant company. This is evidenced in the telex dated 18th of December and addressed to United Indo Singapore Corporation (private) Limited, to Mr Peter WONG. It reads:-

14. Again, nothing was done by the defendant after the receipt of this telex. As a result the plaintiff had to pay rent not only for December, and they paid rent for January, February and, later, had to negotiate with the landlord resulting in the payment by the plaintiff to the landlord in the sum of $49,236.00 in order to terminate the tenancy in respect of those rooms. This was done after the plaintiff had advertised for other tenants to replace the defendant without any success. These are the facts I find as proved.

15. My reason for finding these facts is that I have no doubt that there had been an oral agreement to start with between the plaintiff and the defendant to the effect as alleged in the Statement of Claim. Otherwise Mr WONG Yau-cheung would never have brought Mr Lawrence WOO to see the landlord at all. Otherwise it would have been for no purpose whatsoever. Mr. WOO would never have signed the provisional agreement, document 2, in such terms with the landlord. Even if he signed document 2 in such terms, Mr Lawrence WOO would never, never have signed the written agreement in document 3 for the purchase of fixtures and fittings and air-conditioners. These fixtures and fittings were all fitted in the rooms. Unless a person is completely out of his mind there is no point in buying the fixtures and fittings unless he intends to take the rooms or to take over the rooms as a succeeding tenant. Such things can only be consistent with the conduct of a purchaser or successor entitled to the rooms. The fixtures and fittings when stripped off the room would be worth a pittance, and certainly not at the sum of $6,000 so are the air-conditioners.

16. The only question following this is to consider whether Mr WOO was acting without authority at all when he entered into the written agreements documents 2 and 3. In this connection I have to have regard to the fact that both the United-Indo in Singapore and the defendant company in Hong Kong are in fact family companies run by one person, the head of the family, Mr Peter WONG. I can't help feeling that the question of lack of authority is an entire red herring. The defendant admitted in paragraph 10 of the defence that they have entered into a written agreement with the plaintiff company dated the 11th day of November, 1974 for the purchase of the furniture and fittings in the sum alleged in paragraph 11 of the amended Statement of Claim which is referable to document 3. In view of my observations on the question of persons trying to buy fixtures and fittings, I don't think I need say any more except that if Mr Lawrence WOO were not given any authority whatsoever to sign any agreement, the defendant would have denied WOO's authority to sign document 3. If Mr WOO as alleged by Mr Peter WONG as a person who was never an employee of the defendant company and was never vested with any authority whatsoever to sign any agreement whatsoever, one is surprised that he is entitled to sign an agreement with the plaintiff, namely, document 3. I also find that Mr WONG's evidence is rather surprising in that he said the only reason he sent Lawrence WOO to Hong Kong was for two purposes and two purposes alone. One was to bring back a letter which appears to be of no significance whatsoever all the way from Hong Kong to Singapore. It would take Mr WOO a week to stay in Hong Kong to bring it back to Singapore. The second is for Mr Lawrence WOO to view premises, to look out for premises which could be used as office premises of the defendant. That by itself is rather peculiar conduct on the part of an experienced businessman. But there are more surprises to come. Mr Peter Wong said that when Mr Woo went back to Singapore he brought him the letter without any enclosure which was mentioned in the letter. That did not shock him. That did not infuriate him. But he was furious because Mr WOO signed the provisional document in document 2. Despite his fury he never said a word, never sent a letter, never sent a cable to revoke or rescind anything that was done by Mr WOO for the lack of authority. On the contrary, he came in fury, I suppose, with Mr WOO for yet another trip to Hong Kong to have a good look at the premises himself. He found that he did not like the premises. Yet he took no step to inform either the plaintiff or the landlord of his displeasure or the lack of authority on the part of Mr. Woo. He went back with Mr Woo to Singapore. It was not until they were all on board the aeroplane on the return trip that he gave some fatherly advice to Mr Woo to the effect that, "As a matter of courtesy you should let the other parties know that we didn't want the premises". He did not say that Mr Woo had no authority. His only reason was: "we did not like the premises". Back he went to Singapore in early December. Again, nothing was done. Having observed Mr WOO committing blunder after blunder he took no step to correct it. He left the entire business of sorting it out, to Mr WOO. In the course of the proceedings, I gave the example that Mr Wong might as well let loose a dangerous animal to the commercial world. Having regard to the evidence, and on second thoughts, I think it might be too unkind to describe Mr Woo as a dangerous animal because an animal has existence. Having regard to Peter Wong's evidence I rather describe Mr Woo as a businessman's or employer's nightmare which may or may not exist. It may be in a person's imagination.

17. On the day before the telex was sent by Mr Wong Yau-cheung, he talked to Mr Peter Wong was on the long-distance telephone call. Mr. Peter Wong never said one word to Mr. Y.C. Wong that Mr Woo had no authority. The question of authority was never, never raised until the late amendment just before the start of the proceedings in November this year. That is why I say that it is a red herring. Without having to rely on any legal authority but on the question of fact alone, I am satisfied that Mr Woo was clothed with full authority as an agent in Hong Kong to look for office premises for the defendant including the conclusion of a tenancy agreements. By looking for premises I interpret it as looking for premises in the broad sense, looking for premises and acquiring office premises. Even if I am wrong in this, and even if Mr Woo in fact had not the authority to do so I find that Mr Woo had represented himself to have such authority and that Mr Peter Wong gave him every chance to represent himself to the persons dealing with Mr Lawrence Woo. It is quite reasonable for persons dealing with him to assume that Mr Woo had the authority. In short, Mr Woo had the ostensible authority to act on behalf of the defendant in Hong Kong.

18. Thus in the case of Freeman and Lockyer v. Buckhurst Park Properties (Mangal) Limited 1964 2 Q.B., 480, Lord Justice Pearson citing the judgment of Lord Justice Willmer said:-

"The ground of the judge's decision in favour of the plaintiffs is stated in these two sentences of his judgment: 'In my judgment a company is bound by the acts of persons who take upon themselves, with the knowledge of the directors, to act for the company, provided such persons act within the limits of their apparent authority, and strangers dealing bona fide with such persons have a right to assume that they have been duly appointed ... In my opinion in the present case Kapoor was acting as managing director, certainly as a director acting for the company with the knowledge of his board, and I hold that the company is bound by his action in employing the plaintiffs.' "

Similarly, I find that the defendant through its managing director was fully bound by the act of Mr Lawrence WOO for sending him to Hong Kong or allowing him to clothe himself with such ostensible authority on so many occasions. In his judgment in the same case Lord Justice Pearson said:

"In this case the company has known of and acquiesced in the agent professing to act on its behalf, and thereby impliedly representing that he has the company's authority to do so."

That may be said as an apt discription of Mr Peter Wong's conduct when he found out that Mr Woo had signed an agreement without any authority at all.

19. The next question I will consider is whether there was lack of consideration. As I understand the doctrine of consideration, the question is whether there is any consideration and not there was adequacy of the consideration. Learned counsel for the defence contends that the plaintiff was anxious to vacate the premises anyway. Vacating the rooms meant nothing for the plaintiff. As such, vacating of the room was no consideration at all. However, there is nothing to prevent a person selling something which is quite worthless like a pair of old shoes, provided he can find a purchaser. The old shoes would be sufficient consideration. The question in this case is not that the plaintiff would have to vacate the rooms anyway. The plaintiff relying on the oral agreement, as I've found that such an agreement existed, was vacating the rooms in favour of the defendant. He was not vacating the rooms for any Tom, Dick and Harry that happened to come along. He was vacating it for the defendant. If one turns to the other side of the scale, had the plaintiff admitted yet another purchaser and vacated the rooms not to the defendant but to another person, I am certain that the defendant would have a good course of action. For this reason I cannot accede to the contention that there had been no consideration at all moving from the plaintiff. It might be a consideration that was of little value to the plaintiff but value it was because the plaintiff was never obliged, first of all, to vacate on the 1st December nor, indeed, obliged to vacate on the 1st January, 1975. However, he did on reliance of the agreement vacate the rooms.

20. The next question is whether there was insufficient evidence or memorandum is writing to evidence the oral contract. The Timmins case, that is Timmins v. Moreland Street Property Co. Ltd. in 1958 1 Ch.110, has been cited in support of the proposition that there was insufficient evidence in writing. But in that case it was held:

"That where two documents are signed at one and the same meeting as part of the same transaction, the document signed by the party to be charged should not be treated as incapable of referring to the other document merely because the latter, on a minute investigation of the order of events at the meeting, was found to have come second in the order of preparation and signing."

It was also held:

"That it was indispensably necessary in order to justify reading two documents together that where the document signed by the party to be charged did not contain in itself all the necessary ingredients of the memorandum, it should, expressly or by necessary implication, refer to some other document in order to justify parol evidence for the purpose of the identification of that other document; and it was impossible in the present case to spell any such reference out of the cheque which was drawn, not in favour of the vendor, but of his solicitors."

That was a case in which there was just a cheque drawn for a sum of money and that a receipt describing the property was given in the same sum. This case is distinguishable in the sense that in Timmins' case the only connection between the cheque and the receipt was a sum of money and they bear different dates. In the present case if one reads document 3 and 2 together, one has no doubt that these matters and terms of agreement were referable to the rooms. Document 3 refers to the release of the rooms by the plaintiff. Document 2 refers to the same rooms to be let to the defendant subject to the availability of the rooms. If that is not enough, there is document 5 which refers and acknowledges the existence of document 2 the provisional agreement concerning renting of the rooms and then starts to say that "we wish to opt out", which to my understanding, is a repudiation of the provisional agreement. It is held in Thirkell v. Cambi in 1919, 2 King's Bench, 590:

"That a letter signed by the party to be charged or his agent in that behalf, and referring to other letters as containing the terms of a contract may, although it repudiates liability on the contract, be a sufficient note or memorandum in writing; but if, while referring to other letters, it refuses to admit that they contain the terms of the contract, it is not a sufficient note or memorandum."

In this instance, Mr Lawrence Woo wrote that letter confirming the existence of that contract, the provisional contract, which gave the particulars and the details as to terms of rentals and everything relating to the lease or tenancy agreement and repudiated it. Now that letter may be regarded as writing by the person to be charged confirming the details contained in document 2. It is then said that whatever the terms of document 2 may be, such terms are not binding at all on the parties. The case of Branca v. Cobarro in 1947, 1 King's Bench, page 854 is cited in support of that proposition. In that case:

"By an agreement dated July 15, 1946, the defendant agreed to sell to the plaintiff a mushroom farm for 5,0001., of which 5001. was paid by way of deposit. The agreement contained the following clause: 'This is a provisional agreement until a fully legalized agreement, drawn up by a solicitor and embodying all the conditions herewith stated, is signed.' The plaintiff having repudiated the agreement brought proceedings to recover the deposit on the ground that there was no concluded agreement."

It was held ...

"... that on the true meaning of the words 'This is a provisional agreement until,' the agreement remained effective until the fully legalized agreement was drawn up and signed. The drawing up and signing of the fully legalized agreement was not a condition of the agreement entered into so as to prevent there being a concluded agreement meanwhile."

21. A fortiori the provisional agreement in the present case is enforceable. In the present case provisional agreement provides that it will be superseded only by a formal agreement. In other words, the terms of this provisional agreement will be incorporated in a formal document, a formal lease agreement. It is contended that where as the provisional agreement consists of one single piece of paper, we have a specimen of the formal lease agreement consisting of five pages. There are many clauses which may be termed as the tenant's covenant and the landlord's covenant. As such, this provisional document, document2, has no binding force. I must confess I cannot find that that is necessarily so. In my view, this provisional agreement in document 2 is a sufficient agreement to enable the landlord to enforce the full effect of the terms. The additional terms in the formal agreement may be said to be usual terms between landlord and tenant. If this provisional agreement is supposed to have no binding effect then the law of conveyancing would have to be changed very drastically because in that event no one can ever enforce an agreement of sale until a formal conveyance has been executed.

22. I find that the document 2 has a proper binding force on the parties, that is between the landlord and the defendant.

23. The next question is whether a formal agreement between the landlord and the defendant is a condition precedent to the validity of the oral agreement between the plaintiff and the defendant. I am of the opinion that once the provisional agreement in document 2 has been signed, the condition precedent is as good as having been fulfilled on the principle that equity regards as done what ought be done. The landlord can enforce document 2 at any time against the defendant. Whether the landlord chooses to do so or not is neither here nor there. The defendant was legally bound by document 2 to execute a formal lease agreement. The fact that the defendant refused to enter a formal agreement does not avail him to tell the plaintiff that, "Because of my breach of contract with one person therefore I am entitled to commit another breach of contract with you." I am certain the law of equity will look at such conduct or defence with a frown. Lastly I come to the question of part performance.

24. It is true that before part performance is sufficient for the enforcement of the contract, that must be a part performance referable to the contract by the person trying to enforce the contract. I do not want to repeat myself but it is sufficient to observe that Steadman's case 1974, 3 W.L.R. page 956 gives the principle. In this instance all I need to say is that in reliance on the oral agreement the plaintiff did vacant the premises as from the 1st of December and that was sufficient part performance on the part of the plaintiff. Such an act is referable to the terms of the oral contract. Furthermore, there was also part performance on the part of the defendant in that the defendant entered into a provisional agreement with the landlord and actually paid $3,000 as good faith money to the landlord. For these reasons I am of the opinion that the plaintiff must succeed in this action on the question of liability.

25. I will come to the quantum of damages. The plaintiff alleges that as a result of the breanch of contract on the part of the defendant the plaintiff was obliged to pay two extra months' rent namely the rent for January and February 1975. On top of that he had to bargain with the landlord and eventually paid a sum of $49,236. He had to spend $7,000 to reinstate the rooms to their original condition. The plaintiff also lost the profit for the sale of fixtures and fittings and air-conditioners to the sum of $8,775. There was also the costs of advertisements for tenants to replace the defendant after the breach of contract. The plaintiff claims that the advertisement came to the total sum of $1,080. It has been contended that what the plaintiff should do was to mitigate the damages. Had the plaintiff been willing to pay for the difference of rent that were offered by any tenant coming forward to take over the rooms at any rent then the plaintiff would be able to mitigate the damage and out the loss. In this respect neither witness Mr. K.C. Lee or Mr Yan is of any assistance to me in the sense that while both of them are independent and objective, but both of them seem to have very little to say in the matter. My impression is that their directors would have to be consulted. They had no precedent whether a tenant would be allowed to take such a course namely to introduce a new tenant at a low rental and to pay the difference so as to cut the loss. Thus the question of a differential of payment is entirely hypothetical. No such question ever arose and no such proposition was ever put by either the landlord or the plaintiff. In any event even if the plaintiff liked to have some one to replace it and was willint to pay for the difference in rent, it must be someone with a sound financial standing and subject to approval of the landlord. According to the evidence of Mr. WONG Yau-cheung, there simply was no interested person to answer to the plaintiff's advertisement. The only way out then was to cut the loss to the minimum. I find that the sum of $49,236 is a reasonable sum to out loss rather than paying the full rent for the full period of the tenancy. It has also been contended that the defendant is being charged twice, once for the reinstatement of the premises for stripping the fixtures and fittings and again for the purchase of the fixtures and fittings. To this contention my observation is this: The contract if carried out meant that the defendant would take over not only the rooms but also the air-conditioners and fixtures and fittings. Then at the end of the expiration of his own term with the landlord, the defendant also would take over the liability to reinstate the rooms to their original condition. Looking at it in this way, I don't feel that the defendant is being charged twice. This is a damage that the plaintiff will have to suffer and a damage flowing natually and directly as a consequence of the defendant's breach of contract.

26. The fixtures and fittings might be worth a pittance and that the air-conditioners certainly would not be worth the amount that has been assigned to them. It is true that taking them item by item and piece by piece there is no evidence as to their market value. However, their value has been agreed between the plaintiff and defendant. I will not claim any judicial knowledge in the matter. Anyone who has ever sued an air-conditioner should know and would know that if an old air-conditioner is sold with the premises, it is worth much more than removing it and selling it separately. Having regard to the agreed sum and having regard to the evidence of Mr Y.C. Wong that he couldn't sell any of the air-conditioners if taken away, I am inclined to award the full sum of $7,795 for the air-conditioners and the fixtures and fittings. This is so because the plaintiff is prepared to giva a reduction of $1,000 to its claim on this item.

27. As to advertisement, it is also conceded that some of the advertisements relate also to other rooms as well. It is conceded by counsel for the plaintiff that the sum $480 should be deducted from the sum claimed and I award for this item a sum of $600 instead of $1,080. I work out the total sum after the various deductions, to be $89,218.20. I give judgment to the plaintiff in the sum of $89,218.20 accordingly with costs.

Representation: