Chu Sing Hang v. Attorney General

HCMP000302/1980

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

____

BETWEEN

_____

Coram: The Hon. Mr. Justice Hunter.

Dates of Hearing: 6th and 7th December 1983.

Date of Delivery of Judgment: 7th December 1983.

__________

JUDGMENT

__________

1. This case concerns a site at the Yuen Tun Circuit, Tsuen Wan in the New Territories. On the 12th June 1972 the site was let by the Crown to the present plaintiff, on what I am told was the then Common Form Short Term Tenancy Agreement. The guts of the agreement, if I can so describe it, appear in the First Schedule.

2. There, the location is specified; the area is specified; the rent is said to be $13,800 for the first year and $1,150 a month there-after; and the term is said to be for one year certain and thereafter from month to month.

3. Those were the only special terms, one might almost call them the manuscript terms of the agreement. All the rest was in print and common form. Clause 1 was the agreement to let which picked up the material in the first schedule; clause 2 picked up a series of tenant's covenants; clause 3 was the landlord's covenant for quiet enjoinment; Clause 4 had some assorted terms in it. It started with a proviso for forfeiture in 4A and ended in 4F with a definition of tenant.

4. So under that agreement the plaintiff went into possession and at the expiration of the first year became a monthly tenant. At the premises he carried on his scrap metal business. Now come 1979, the Crown decided that it was time to carry out a general review of the rentals under this type of agreement. The Local District office received a circular, which was tantamount to an instruction from the then appropriate department, instructing the District Office to send out to all tenants under these agreement first an explanatory letter both in English and in Chinese, and secondly a supplemental agreement. The explanatory letter makes it clear that the proposal is for the rent under the tenancy to be increased by 50% in two stages; the first stage was to take effect as to 25% on the 1st October of that year, 1979; and the second stage on the 1st October 1980. If you read the letter, you will see these words appearing: "I am enclosing two copies of the supplementary agreement which provides details of the revised rentals you will be required to pay." The reader was told that if he did not agree with this, his tenancy would expire on the 30th September next. And as an afterthought the letter went on to say that the measurements in the agreement were going to be changed to metric units.

5. Mr. Chu, the tenant, got this letter. He read the Chinese version. He did not think much of the rent increase but recognised that he had to accept it. Upon the basis of that, and that alone, he then signed the supplemental agreement. He could not read English. He could not himself read the supplement a agreement, and he never had it read to him. Likewise, for reasons to which I shall come in a moment it is perfectly apparent that this Local District Office never read the supplemental agreement either, because some of its terms were totally inappropriate.

6. The net result of that exchange was that on the 23rd April 1979, the supplemental agreement came into existence signed by both parties. Later on that year the Crown decided that it wanted to recover possession of the premises, and on the 1st November it sent to the tenant a Notice to Quit. The Notice to Quit required possession to be delivered up on or before 1st January 1980. As the Notice was dated 1st November it was ample notice to terminate a monthly tenancy and no point is taken upon the length, or the fact that there was lack of definition of the termination date. A point which is taken on this Notice is that it refers in its recitals to both the tenancy agreement and to the supplemental agreement. I have never seen how this can operate adversely to this Notice to Quit. As will be seen in a moment when I look at the supplementary agreement in more detail, it substituted certain terms for terms in the tenancy agreement. There was no way in which anyone could draft a Notice to Quit, in my judgment, in this case, which referred to the agreement under which the premises were being held, without referring to both these documents.

7. The question which I have to decide here is the true construction of that supplemental agreement. I then come back to that. The form of the agreement was this: It said that it was mutually agreed that as from the 1st October 1979 the terms as to (I am paraphrasing here) rent and term "in the first schedule shall be deemed to be amended to read as follows." In other words the intent of the document was to delete the terms which appeared in the original first schedule and to substitute what followed. The first thing that followed was an area figure in square metres instead of square feet. No point arises on that. Problems arised on the next two where the agreement reads like this: "Rent, subject to clause 4F hereof $1,437 a month payable in advance on the first day of each month commencing from the first day of October 1979. Provided that as and from the first day of October 1980 and subject to the tenancy not having been determined pursuant to clause 4F hereof the rent shall be increased" and so on. Then against the word "term" one finds this: "monthly commencing from the first day of October 1979 until determined under clause 4F of this agreement". Now as I indicated the intent is that these words were to be written into the principal agreement. If you write them into the principal agreement and glance up the page to the clause 4F, you will find that 4F is a definition of tenant. It is perfectly obvious that the draftsman of the supplemental agreement had in front of him some form of lease different to that which had been granted to this plaintiff in 1972. Therefore he adopted a form which was totally inappropriate in the present contest; Really the problem is what to do with this very messy situation.

8. The first and obvious thing (there is no issue about this) is that the agreement and supplemental agreement read together as they must be, as they stand, are literally meaningless. There is no way in which you can make a good sense out of these references to clause 4F in relation to the existing clause 4F which is no more than a definition clause. It follows from that, and this again is common ground that something has to go; something has to be rejected; there has to be some surgery on this messy document to give any sense to it at all. The issue between the parties really has been whether that surgery should be major or minor.

9. For the Crown it is contended that the surgery should be major in the sense that the words where they first appear "subject to clause 4 hereof" must go next "pursuant to clause 4 hereof" must go and "respective term under clause 4F of this agreement" must go. In other words take out all the references to this meaningless definition of tenancy. The way that is put on behalf of the Crown is really goes like this. It said first of all, the document as it stands does not reflect the intention of the parties. This follows from the fact that both parties are saying that it is meaningless and has to be altered.

10. Secondly the true intentions of the parties are apparent from the other material before the Court. One only has to read the covering letter of 19th March to see that all the Crown was seeking to do was to alter the rent payable under the existing tenancy. There was never any intention there to alter the nature of the tenancy in any shape or form. Correspondingly that is all that Mr. Chu intended when he signed this document, because he never read the document. He was blissfully unaware of this mess in the supplemental agreement. He was going simply upon the basis that what was said in the latter made good sense to him, and was good enough for him, because he could not really dispute this increase in rental. So you have a classic situation here of being able to identify the intentions of the parties without any difficulty at all. Then it said, well give effect to those intentions and this major surgery follows. Alternatively I have been asked to apply the dictum of Denning L.J., as he then was, in Nicolene v. Simmonds which is reported in 1953 1 Q.B. 543 where he uses these words: "The objectionable clause in that case, he says, was "so vague and uncertain as to be incapable of any precise meaning. It is clearly severable from the rest of the contract. It can be rejected without impairing the sense or reasonableness of the contract as a whole and it should be so rejected."

11. For the plaintiff on the other hand, is contended that I am precluded from looking beyond the 4 corners of the supplemental agreement itself for the intentions of the parties. It said that I should do no more by way of surgery to this document than the absolute minimum. The absolute minimum is to delete the letter F wherever it appears so that the various clauses start to read "subject to clause 4". It is said on behalf of the plaintiff the fact that that makes the words tautologous is neither here nor there. It becomes tautologous because you have this situation; that you would read these words into the first schedule; the first schedule is part of an agreement containing clause 4; and all you are saying is that the rent in the schedule is subject to one of the clauses in the agreement. It is a funny sort of provision but it said to be at least unobjectionable. More significantly this approach means that the term becomes a monthly term commencing from the first day of October 1979 until determined under clause 4; and the only way in which the term can be determined under clause 4 is under clause 4A which is a proviso for forfeiture and not an ordinary provision for termination at all. That says the plaintiff creates the situation that the lease becomes terminable by the Crown only if a forfeiting event takes place and the Crown chooses to take notice of that event and serve notice. But it conversely is terminable only by the tenant by giving the appropriate month's notice.

12. I think one only has to see the way in which it has to be put on behalf of the plaintiff, to see that this is really a remarkable agreement. A rather cumbersome way of making sense out of what is a palpable mistake in the document. In my judgment the right answer is that put to me by the Crown. I reach that conclusion really for two reasons. First it seems to me that in any exercise of this nature the governing consideration is the intention of the parties. Now it is perfectly apparent that the intention of the parties cannot be extracted from the four corners of the supplemental agreement itself. In this respect the supplemental agreement is a nonsense. Both parties concede this and concede that surgery is necessary. In those circumstances it seems to me impossible to assert that I am confined to the four corners of the supplemental agreement in the context of this case. If I am entitled to look, as in my judgment I am, at the surrounding circumstances, at the factual matrix, it is abundantly clear what the parties' intentions were. It is abundantly clear that the major surgery asked for by the Crown will give effect to those intentions whereas the minor surgery will not. That is the first point.

13. The second point, I think is this. The minor surgery are asked for in relation to the rental clause, makes that clause extremely difficult to understand. It really goes I think beyond pure tautology. As far as the term clause is concerned, it makes the situation totally ridiculous and almost certainly repugnant. First of all on a literal construction, "until determined under clause 4" would mean that the only provision for termination would be a forfeiture. This would exclude as I see it the termination by notice, not simply by the landlord which is what the plaintiff is asking, but by the tenant as well. Secondly, even if I am wrong about that and it only excludes termination by the landlord, I would be happy to follow the view expressed by Mr. Justice Whitford in Centaploy Ltd. v. Matlodge Ltd. and Another (1974) 1 Ch. page 1 where he said this: "It appears to me that it must be basic to a tenancy that at some stage the person granting the tenancy shall have the right to determine and a tenancy which the landlord is never going to have a right to determine at all is as I see it a complete contradiction in terms." As I read that decision the determination which the learned judge there has in mind is the determination by notice not determination in the event of breach of covenant or by forfeiture.

14. For those two reasons I cannot accept the submissions made to me on behalf of the plaintiff. It follows in my judgment that this agreement was always no more than a monthly tenancy which was validly terminated by the notice to quit to which I referred. A gallant effort has been made to raise an estoppel in this case . I need say no more than I cannot accept it. It follows that the claim in the plaintiff's originating summons fails, the defendant counterclaim for possession succeeds and there must be an order for possession. The sort of time limit I have in mind at the moment is six weeks but I am happy to hear counsel on that, and on the figures in relation to the claim for mesne profits.

Representation:

Malcolm Merry instructed by Edmund Cheung & Co. for Plaintiff.

John Berdett, Crown Counsel for Defendant.