Hung Ming Hua and Others v. Chow Hung Hin

HCA009233/1981

1981 No. 9233

Landlord and Tenant (Consolidation) Ordinance Cap.7. A provision for determination of a fixed term tenancy agreement on the premises being rendered unfit for human habitation in circumstances not attributable to the act or default of either landlord or tenant is a provision for earlier determination within section 121(2)(a). Part V of the Ordinance held to apply to the agreement. Six months written notice to quit necessary on the part of the landlord. (Action No. 680 of 1969 and Miscellaneous Proceeding 276 of 1982 considered).

BETWEEN

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Coram: Hon. Mantell J.

Date: 14 December 1982

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JUDGMENT

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1. The plaintiffs in this action, a mother and two sons, are the registered owners of commercial premises in North Point, Hong Kong.

2. On the 21st July 1978, they let the premises to the defendant for a fixed term of three years commencing on 1st September 1978 at a rent reserved of $9,500 per month. The terms of the tenancy agreement provide inter alia at clause 4(n) as follows:

"In the event of the demised premises or any part thereof at any time during the said term being damaged or destroyed by fire or by any other cause (not attributable to the act or default of the Tenant) so as to be unfit for habitation and use then the rent hereby reserved or a fair proportion thereof according to the nature and extent of the damage sustained shall be suspended until the demised premises shall again be rendered fit for habitation and use and the Tenant shall move away all its articles, machinery and other things in the demised premises within ten days from the date of any written notice from the Landlords to enable any repairing work to be carried out therein provided that nothing herein shall impose on the Landlords any obligation to repair or reinstate the demised premises and if the demised premises shall not be repaired or reminstated within a reasonable time the Tenant or the Landlords may terminate the Agreement by one month notice in which event and upon the Tenant vacating the demised premises neither party shall have any claim against the other apart from rights of action already accrued prior to the material time."

The first question for me to decide is whether or not having regard to that provision the tenancy was caught by Part V of the Landlord and Tenant (Consolidation) Ordinance Chapter 7. If it was caught by Part V then, notwithstanding that the agreement was for a fixed term, it would be necessary for the plaintiffs to serve written notice of not less than six months in order to bring the tenancy to an end. Part V applies to all tenancies unless specifically excluded by section 121(2). Of the several categories of tenancy excluded from the application of Part V, only one is material. Section 121(2)(a) provides:

"This part shall not apply to the following:

(a) a tenancy for a fixed term of 3 years or more the agreement for which contains no provision for earlier determination of the same other than for breach of any of the provisions of the agreement."

The plaintiffs contend that the tenancy in the instant case falls within that exception and therefore would come to an end at the expiration of the fixed term without the necessity of a six months notice. They rely upon the decidion of Mr. Justice Williams in the case of Fu Hop Investment Co. Ltd. v. Cheng Hong Man & Others (Action No. 680 of 1969) from which it appears that the learned Judge took the view that a clause in similar terms to 4(n) was not to be read as containing "a provision for earlier determination". Therefore, in that case, it was held the tenancy remained an exception to Part V, or its equivalent under the earlier legislation which the learned Judge was considering, and Part V did not apply. I read the relevant portions of the judgment:

"The tenant further submits that Clause 4(g) could enable the landlord to determine the tenancy within three years. It states that if the premises or "any part" are destroyed by fire, typhoon, etc. the landlord may determine the lease. Mr. Woo argues that the expression "any part" gives the landlord such a wide margin that he would not have found it difficult to forfeit the lease. Once again one has to examine Clause 4(g) and construe it against the lessor in so far as it may be a provision for his benefit. Clause 4(g) states that the rent shall be reduced in proportion to the amount of the premises destroyed or made uninhabitable; but the landlord instead of being obliged to repair may determine the lease. No court would construe the reference to "any part" of the premises in an absolutely literal fashion; it it must be construed by reference to the purpose of the lease. The destruction of a bathroom, toilet, kitchen, or of one room could scarcely render the entire premises uninhabitable to the extent of entitling the landlord to re-enter. Clause 4(g) contemplates a situation where the premises have been so damaged that it would require considerable expenditure of money and of time to render them satisfactory for occupation and use. Properly construed Clause 4(g) is one which releases both parties from their obligations under the lease in the event of the subject matter being rendered substantially useless as the result of an occurrence e.g. typhoon beyond their control. It can scarcely be regarded as a provision to the landlord's advantage enabling determination of the lease of a building, if that building has been virtually destroyed by fire, typhoon, etc. In my view, Clause 4(g) does not bring the lease within the Tenancy (Notice of Termination) Ordinance."

3. I confess that I have some difficulty in following the reasoning by which the learned Judge arrived at his conclusion but it is right to say that it provides support for the plaintiffs in their contentions here.

4. The defendant argues that Clause 4(n) does contain a provision for earlier determination. Therefore, it is no exception. Therefore it is caught by Part V and, therefore, subject to surrender of vacant position by the defendant, six months written notice was necessary to bring the tenancy to an end. The defendant relies upon a decision of Mr. Justice Fuad, as he then was, in Joseph Edward Houghton v. Jimmy's Kitchen Ltd. (Action M.P. 276 of 1982). In that case, Mr. Justice Fuad was called upon to construe a similar provision to Clause 4(n) and also to that which fell to be considered by Mr. Justice Williams in the earlier case. He was referred to the judgment of Mr. Justice Williams. He came to precisely the opposite conclusion. He held that the clause did contain a provision for earlier determination and was therefore, caught by Part V of the Ordinance. It is unnecessary to set out at length, Mr. Justice Fuad's reasons for reaching his decision which appear at page 6 and following of the judgment but I do say that I respectfully agree with his approach and it is one which I propose to adopt and follow in this case. The first conclusion that I reach is, therefore, that this tenancy agreement was subject to the provisions of Part V of the Landlord and Tenant (Consolidation) Ordinance and required six months written notice on the landlord's part to bring it to an end.

5. On 23rd April 1981, the then solicitors for the plaintiffs wrote to the defendant or rather his firm as follows:

"We act for Madam Hung Ming Hua, Mr. Wong Kit Wai Eddie and Mr. Wong Si Wai Christopher, your landlords of the above-mentioned business premises.

We are instructed that the above premises have been let to you by our clients for business purposes for a term of 3 years commencing from the 1st day of September 1978 to the 31st day of August 1981.

We are further instructed to give you notice which we hereby do in accordance with Section 122 of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, that you are required to quit and deliver up vacant possession of the above premises to our client upon the expiration of the term of the Tenancy Agreement or in any event not later than the 31st of November 1981."

It is clear from the terms of the letter that the plaintiffs' solicitors believed at that time that Part V did apply and were attempting to comply with section 122(1). There may have been a miscalculation in that the notice was for upwards of seven months but it was, in my judgment, a good and sufficient notice to determine the tenancy on 31st November, 1981.

6. From the evidence of Mr. Christopher Wong, it seems that following the sending of that notice, a different view was taken of the legal position and the second letter was, therefore, sent on 14th July 1981. I should read that letter omitting the first paragraph:

"We are given to understand that your tenancy in respect of the above premises will be expiring on the 31st day of August 1981. Since your tenancy is for a term of 3 years, you are therefore not ontitled to any notice under Part V of the Landlord and Tenant (Consolidation) Ordinance, Cap.7 and are therefore required to quit and deliver up vacant possession of the said premises to our clients on the 31st day of August 1981 in accordance with the terms of the Tenancy Agreement you have with our clients dated the 21st day of July 1978."

Having concluded that there was a tenancy to which Part V applied it is unnecessary in the circumstances of this case to decide the precise legal effect of that second letter. It may be of no consequence whether its effect was to leave the original notice untouched or whether it amounted to a withdrawal of the first notice. The matter has not been argued and I only say that I incline to the former opinion. Be that as it may and on any view the letter of 14th July was not effective to determine the tenancy any earlier than 31st November 1981.

7. Then at the end of July or beginning of August, there was a meeting at the Lee Gardens Hotel. It was attended by the three plaintiffs and the defendant. By this time the going rate for premises of this kind was far greater than the rent being paid under the agreement. The account of Mr. Christopher Wong and the defendant of what took place at that meeting are not irreconcilable save as to one matter. Both sides were uncertain about their respective positions at law. The plaintiffs wished to explore the possibility of the defendant entering into a new agreement at an increased rent. The defendant was not interested. The defendant was asked when he would vacate the premises. According to Mr. Wong, he said not later than the end of September. According to the defendant there was no certainty about the date. He simply said that he might move out before the end of November possibly by the end of September but that he would do his best to move out as early as possible. That is the matter in dispute. To support the plaintiffs' version perhaps is the fact that the deposit paid by the defendant at the beginning of the tenancy and equal to two months instalment of rent was accepted in satisfaction of the rent for August and September. On the other hand, the fact that the defendant continued in occupation after the end of September without protest goes the other way. I find that although there was hope or even an expectation on the part of the plaintiff that the defendant would vacate at the end of September there was no firm agreement to that effect. It follows that if I am wrong about the application of Part V to this tenancy the defendant continued in occupation after 31st August either as a tenant on sufferance or under a new tenancy from month to month.

8. To continue the history, as I have said, the defendant did not surrender his tenancy or vacate the premises at the end of September. He continued in occupation. He sent a cheque for October's rent. It was accepted. No protest was made, no solicitors' letter sent. Towards the end of October, Mr. Wong, whom I accept as a witness of truth, started to look about for a new tenant. On 31st October, the three plaintiffs went to the premises where they saw the work of clearing up in progress. There was still rubbish lying about. Not all the defendant's furniture and tools had been removed and there remained in postion some partitions or structures which had been put in by the defendant. It has been submitted that there is no evidence as to whether or not the partitions had been put in with the consent of the plaintiffs, because it is said, if they had, there would have been no duty on the part of the plaintiffs to remove them. There is no direct evidence on the point but I have no difficulty in inferring from the evidence of both Mr. Wong and the defendant that they had been put in without reference to the plaintiffs and I so find as a fact. During this visit the defendant arrived at the premises and a discussion took place. Much of it was between the defendant and Madam Hung. Madam Hung did not give evidence. Mr. Wong, however, has told me that he was present at all times when discussions took place between his mother and the defendant. I accept that. During the meeting, the defendant says and I accept, he handed two sets of keys to Madam Hung. Was that sufficient to amount to a surrender of the tenancy? In my view, it was not. The defendant had plans to leave the Colony for a time. It is common ground that the plaintiffs wanted the premises cleared and to be able to show prospective tenant around and I find that it was convenient for them to have keys. Now arises the second question of fact over which there is a serious dispute. The defendant contends that in the presence of a Mr. Cheez, who had been employed to remove the defendant's effects, he and Madam Hung in effect agreed that the cost of clearing the premises would be shared. His contribution would be $3,000. Madam Hung would pay the balance. Mr. Wong says no such agreement was struck. It was understood that the responsibility for clearing the premises was Mr. Chow's, the defendant, and that any arrangement for payment was a matter between Mr. Cheez and the defendant. Broadly the defendant's version is supported by Mr. Cheez saying that he would not pay more than $3,000. He remembers Madam Hung saying that she wanted the work doing quickly. He does not speak of an agreement to share the cost. I cannot see why Madam Hung should have seem fit to offer any contribution and I resolve that conflict between Mr. Wong on the one hand and the defendant and Mr. Cheez on the other in favour of Mr. Wong.

9. In reaching that conclusion, I put aside the very disturbing but purely collateral conflict between the evidence of Mr. So, a solicitor and Mr. Cheez about what happened at the solicitor's office on a subsequent occasion. In the days following 31st October, Mr. Cheez approached the plaintiffs to say that the money paid by the defendant, namely the $3,000 was not enough. He needed more. In the end he asked for another $3,500. Faced with the prospect of paying up or not being able to have the premises cleared, the plaintiffs paid reluctantly. Eventually the premises were cleared and became available to be re-let on or after 17th November 1981.

10. I find that 17th November 1981 is the date upon which the defendant surrendered up vacant position of these premises and is the date on which his tenancy came to an end. I find that the plaintiffs were not prepared to accept the surrender of the premises other than with vacant position. Nor were they required to do so. Once the rubbish and the partitioning had been removed, there could be and was a giving up of vacant possession. The handing over of the keys on 31st October, apart from being a convenient arrangement in the meantime, merely anticipated a surrender of the tenancy at the first opportunity after the premises had been vacated. My findings as to when the tenancy ended would be the same whether or not I am right about the application of Part V of the Ordinance because I hold on the other view that the tenancy on sufferance or from month to month was also surrendered on 17th November.

11. The plaintiff claims damages for breach of agreement in failing to deliver up possession on 31st August. Clearly that claim must fail. However, the plaintiffs would be entitled to rent for the period from 1st November to 17th November. There is no claim in the Statement of Claim for unpaid rent. This is a case which came from the running list and counsel were instructed at short notice. The pleadings were far from satisfactory on both sides. I have given leave to both sides to make late amendments. I propose, if application is made, to give the plaintiff leave even at this stage to amend in order to claim unpaid rent for the period 1st November to 17th November.

12. The plaintiffs also claims damages for breach of Clause 4(i) being the usual covenant to deliver up the premises with vacant possession. He says that they have suffered damage in the sum of $3,500 which they were obliged to pay in order to recover the premises with vacant possession. Mr. Murray appearing for the plaintiffs has referred me to authority on what is meant by the expression or term "vacant possession". It is not a matter which I need to consider. Mr. Yu argues that there could be no breach of covenant until the expiry of the tenancy, which for the purpose of this argument if not for others, he puts as being the 17th of November and, of course, he does not concede that there was any obligation on the defendant to remove the partitions.

13. The questions posed appears to be these. Had the plaintiffs the right or even the duty to attempt to mitigate any damage anticipated to arise from the defendant's failure to deliver up vacant possession on due date and that being so, are they entitled to recover the cost of mitigating such damage in advance of any breach. The point has not been argued by the plaintiffs and I have not been referred to any authority but I believe that the first question embodies a principle of trite law. The second is more difficult. I resolve both questions, with some reluctance, in favour of the defendant. On my conclusion as to the facts and as to the law, apart from surrender, this tenancy would not have come to an end until at the earliest 31st November. There was not the urgency for the plaintiffs to intervene, save and so far as it was in their interest to do so. It was in their interest because they hoped to substitute a more valuable tenant. I find, therefore, that there was no necessity to undertake the completion of the clearance of the premises at the date when they agreed to pay Mr. Cheez the $3,500. On the second point which only arises if I am wrong as to the first whereas I note that there is authority for the proposition that the cost of mitigating damages is recoverable and also that mitigation of damages may be justified in advance of any breach, I know of no authority which says that loss, whether or not sustained in the course of mitigating damage is recoverable unless attributable to an actual rather than an anticipated breach.

14. The rent calculated pro rata on a monthly basis for the period 1st November to 17th November is agreed as being $5,383. Subject to Mr. Murray making the application for leave and my granting it, the plaintiff shall have judgment for that amount.

Representation:

Miss H.C. Wong & Mr. R. Murray (H.M. So & Co.) for Plaintiff

Mr. B. Yu (Robert W.H. Wang & Co.) for Defendant