Bess Fashion Management Co. Ltd. v. Star Play Development Ltd.

HCA004725/2001

HCA4725/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.4725 AND 4726 OF 2001

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(HEARD TOGETHER)

Coram: Hon Ma J in Chambers

Date of Hearing: 5 February 2002

Date of Judgment: 25 February 2002

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J U D G M E N T

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The Landlord's Claim (HCA4726/2001)

1.By a tenancy agreement in writing dated 5 October 1999 ("the Tenancy Agreement") between Star Play Development Limited (through its agents Hang Lung Real Estate Agency Limited) ("the Landlord") and Bess Fashion Management Company Limited ("the Tenant"), the Landlord let to the Tenant for a term of two years from 1 November 1999 the premises known as Shops G06-07, G/F, Hollywood Plaza, Nathan Road, Kowloon ("the Premises").

2.The Premises were business premises and Part V of the Landlord and Tenant Ordinance, Cap.7 ("the Ordinance") applied to it. Accordingly, a notice to quit was required to be served if the tenancy was to be terminated. Under section 122 of the Ordinance, any notice to quit was required to be served not less than six months before the date it was to take effect.

3.On 12 April 2001, the Landlord through its solicitors served a notice to quit on the Tenant seeking to determine the tenancy on 31 October 2001. I shall be returning to the letter containing this notice, as it assumes considerable importance in another context.

4.Delivery up of the Premises not having been made on 31 October 2001, the Landlord commenced proceedings against the Tenant by a Writ dated 1 November 2001 (HCA4726/2001), claiming, inter alia, an order for possession, mesne profits and damages.

The Tenant's Claim (HCA4725/2001)

5.On the same day as the Landlord issuing its Writ for possession, in fact just earlier than this Writ, the Tenant also issued a Writ against the Landlord (HCA4725/2001) claiming that it had validly exercised an option to renew for one year under the Tenancy Agreement. The Tenant claimed a declaration that it had validly exercised the option and also specific performance with damages in lieu in the alternative.

6.In the Statement of Claim, the Tenant pleads an oral agreement having been reached on or about 20 June 2001 between representatives of the Landlord and of the Tenant to the effect that the tenancy of the Premises would be renewed for a further term of two years from 1 November 2001 at the rent of $265,000 a month. It is not clear from the Statement of Claim whether the Tenant is making a separate claim on the basis of this oral agreement quite apart from the claim that it had exercised the one year option, but it is now apparent that this is very much a part of the Tenant's alternative case.

The present appeals

7.It is accepted by both parties that the two actions are mirror images of one another. If either the Landlord or the Tenant succeeds in one action, it will also succeed in the other, albeit in a different capacity (since the Landlord is the plaintiff in HCA4726/2001 but the defendant in HCA4725/2001, and vice versa for the Tenant).

8.In order to avoid confusion, I shall hereinafter continue to use the terms "Landlord" and "Tenant" to describe the parties in the two actions.

9.On 15 November 2001, in HCA4726/2001, the Landlord applied by summons for summary judgment under RHC Order 14. On 11 January 2002, in HCA4725/2001, the Landlord also applied by summons for the striking out of that action under RHC Order 18, rule 19.

10.Both summonses were heard by Master A. Ho on 18 January 2002.

11.On the Order 14 summons, Master Ho ordered that judgment be entered for the Landlord and that the Tenant deliver up vacant possession of the Premises to the Landlord, with further orders for mesne profits and damages to be assessed.

12.On the striking out summons, Master Ho ordered that :

(1) the Tenant's action be struck out; and

(2) there be no order as to costs of the striking out application save that the Tenant do pay to the Landlord the costs of the action up to 14 November 2001 on a party-and-party basis and thereafter on an indemnity basis.

13.The Tenant appeals against both decisions.

The issues in these appeals

14.Mr K.M. Chong (who appears for the Tenant in these appeals) and Mr Paul Lam (who appears for the Landlord) dealt with both applications at the same time. As I have remarked, the two actions are mirror images of each other and for present purposes, they stand or fall together.

15.The Tenant raises the following issues as constituting both its defences in HCA4726/2001 and its claims in HCA4725/2001 :

(1) the Landlord is not entitled to claim possession since the Tenant has by a notice in writing dated 21 April 2001, validly exercised an option to renew the tenancy for another year. (Issue 1 : Exercise of Option)

(2) Even if the said letter dated 21 April 2001 did not, by itself, amount to a valid exercise of the option to renew the tenancy, the Landlord is estopped from contending otherwise or has waived its rights in respect of the same. (Issue 2 : Estoppel and Waiver)

(3) Finally, it is contended that an oral agreement was made between the Landlord and the Tenant to the effect that the tenancy was extended for a term of two years at the rent of $265,000 a month. (Issue 3 : Oral Agreement)

16.If the Tenant can demonstrate an arguable case on any one or more of these issues, I am bound to grant leave to defend. Conversely, in such a situation, I should also dismiss the striking out application.

17.I now deal with these issues bearing in mind and applying the well-known principles governing applications for summary judgment and for striking out.

Issue 1 : Exercise of Option

18.By Clause 13 of the Tenancy Agreement, it is stated that the tenancy was subject to the terms and conditions set out in the Fourth Schedule thereto.

19.Clause 1 of the Fourth Schedule sets out the terms of the option given to the Tenant to renew the tenancy for another year. It states in part as follows :

" 1. Option to Renew

(a) The Landlord shall on the written request of the Tenant made not later than six (6) months before the date of expiration of the original Term created by this Agreement (hereinafter called 'the said expiry date'), and provided that there shall at that time be no outstanding or subsisting breach of any of the agreements, stipulations or conditions herein contained and on the part of the Tenant to be observed and performed, grant to the Tenant and the Tenant shall take from the Landlord a renewal of this Tenancy Agreement for a further term of ONE (1) YEAR (hereinafter called the 'further term') from the said expiry date of the original Term at a revised monthly rent to be determined as hereinafter provided (hereinafter called 'the revised rent') but otherwise subject to the same terms and conditions as are herein contained with the exception of this Clause for Option to Renew and with the exceptions of the amount of the management fee payable, the amount of the deposit and the rent free period. The said written request of the Tenant given by the Tenant shall be irrevocable and once it has been duly given by the Tenant, it shall (subject to the proviso mentioned aforesaid) be obligatory for the Tenant to take a renewal of this Tenancy Agreement in accordance with the provisions hereof.

(b) The revised rent per month shall be the monthly rent at which, having regard to the terms and conditions of this Agreement (other than the rent and this Clause), the Premises might reasonably be expected to be let without premium on the open market by a willing landlord to a willing tenant, it being assumed that the Premises are to be let with vacant possession and in good repair and condition for a term of years equivalent to that provided for in sub-paragraph (a) above and commencing on the said expiry date.

(c) Following upon the making of the Tenant's request in accordance with sub-paragraph (a) of this Clause, the Landlord and the Tenant shall, not later than three (3) months before the said expiry date of the original Term, endeavour to agree the revised rent. In the event that the revised rent has been mutually agreed by the Landlord and the Tenant, the revised rent shall become payable by the Tenant as from the commencement of the said further term and the Tenant shall deposit and maintain with the Landlord such sum as shall make up the deposit paid by the Tenant under this Agreement to the aggregate of three (3) months' revised rent and three (3) months' management fee then payable in respect of the Premises. But in the event the Landlord and the Tenant fails so to do three (3) months before the said expiry date of the original Term, then either party shall, in default of agreement in the meantime either upon the amount of the revised rent or upon such appointment, be entitled to request the President for the time being of the Hong Kong Institute of Surveyors (or its successors or other organisation having substantially the same standing) to appoint an independent Surveyor, being one who specialises in the valuation of commercial premises, to determine the same as an expert and not as an arbitrator and his decision shall be final and binding on the parties hereto. The fees payable to such independent Surveyor in respect of, and any other costs (if any) involved in, any determination made in pursuance of these Option to Renew provisions shall be borne by the parties as he shall direct."

20.The operation and effect of these sub-clauses can be summarised as follows :

(1) In order to exercise the option, the Tenant must make a written request to the Landlord doing so not later than six months from the expiry of the original term (i.e. at least six months from the expiry) : Clause 1(a).

(2) Once the option is validly exercised, the Landlord is bound to grant and the Tenant is bound to take the extended tenancy of one year on the same terms as the Tenancy Agreement except that :

(a) the rent would reflect the market rate, such new rent being determined either by agreement or by an independent surveyor : Clauses 1(b) and (c);

(b) the option to renew clause would not be a term of the extended tenancy : Clause 1(a);

(c) the deposit and management fees payable for the extended tenancy would be determined after the new rent was fixed (note here that the deposit would of course be dependent on the new rent and on the management fee prevailing at the time of the deposit); and

(d) there would be no rent-free period.

(3) Thus, it can been seen that the scope for negotiation of the terms of any renewed tenancy are extremely limited; indeed, the only term which was open to negotiation under Clause 1 was in respect of the new rent to be paid.

21.The exercise of options has been the subject of discussion of many recent decisions at the highest level. The fundamental question is of course : has the option been validly exercised?

22.To answer this question, the following principles must be borne in mind :

(1) The first step is to examine the relevant option agreement to see whether as a matter of contract, the parties have agreed on a specific form or method by which the option is to be exercised. If the parties have agreed that the option is to be exercised in accordance with specific procedures, then these procedures must be followed in order for the option to be validly exercised : cf. Mannai Investment Co. Ltd v. Eagle Star Life Assurance Co. Ltd [1997] AC 749, at 747D-E per Lord Steyn, 774A-B per Lord Hoffmann. This situation, therefore, involves the parties having agreed a "set formula" as it were for the exercise of the option.

(2) Where, however, as in the present case, the parties have not agreed on specific procedures to be followed for the exercise of the option, it will then be a matter of construction of the relevant notice in order to determine whether an option has been validly exercised.

(3) The construction of a notice is, like other document, to be carried out objectively : see Mannai at 767G-H per Lord Steyn; Kou Lau Ru Ling v. Tse Sui Luen [2002] HKC 644, at 651C-E per Ribeiro JA.

(4) A legitimate aid (indeed a requisite factor) in arriving at the true meaning of a document is to have regard to the "relevant contextual scene" or "factual matrix". In other words, in construing a document, the court must necessarily place itself in the position of the recipient of the document to see what he would have reasonably (i.e. objectively) understood the document to mean. In doing so, the court must, in this I stress objective exercise, impute to the recipient a knowledge of the relevant context which would include all relevant contractual terms and the relevant circumstances surrounding the document in question. See here : Mannai at 767G-768C per Lord Steyn; Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 WLR 896, at 912-3 per Lord Hoffmann; Jumbo King Ltd v. Faithful Properties Ltd (1999) 2 HKCFAR 279, at 296E-F per Lord Hoffmann.

(5) The ultimate object in construing a notice seeking to exercise an option (apart of course from the "set formula" situation I have referred to above) is to determine whether the notice unambiguously conveys to the reasonable recipient (with knowledge of the relevant context and the relevant contractual terms) the sender's decision to exercise the option : see Kou Lau Ru Ling at 653G-H.

(6) It follows then that where a notice is ambiguous, it will not have the effect of a valid exercise of the option.

23.In the present case, the Tenant relies on a letter dated 21 April 2001 to the Landlord's agent.

24.Before dealing with that letter, it is important to set out the relevant context :

(1) April 2001 was the relevant month in which the option was to be exercised (the latest date for the requisite notice in writing under Clause 1(a) of the Fourth Schedule to the Tenancy Agreement was six months before 31 October 2001, i.e. 30 April 2001). However, it is also important to bear in mind that this month was relevant to the Landlord serving a notice to quit (as required by section 122 of the Ordinance) in order that the tenancy be terminated on 31 October 2001.

(2) Indeed, by a letter dated 12 April 2001 from the Landlord's solicitors to the Tenant, there was enclosed a notice to quit requiring the Tenant to deliver up vacant possession on 31 October 2001.

(3) The 12 April 2001 letter, apart from referring to the enclosed notice to quit, also stated as follows, "We are instructed that Hang Lung Real Estate Agency Limited may contact you as appropriate should they receive instruction from your Landlord concerning any offer of renewal of your present tenancy, but you will appreciate that nothing herein shall prejudice the effectiveness of the enclosed notice of termination served on you".

(4) In my judgment, the message to the Tenant was that a notice to quit was served but without prejudice to that notice, at some stage, the Landlord or its agent may contact the Tenant with a view to offering and negotiating a renewal of the tenancy. Although I accept that the Landlord must be taken to have knowledge of the option clause in the Tenancy Agreement, this would not have been what the Landlord was referring to in that letter. Apart from anything else, the exercise of the option was not a matter that was in the hands of the Landlord : the initiative for the exercise of the option lay at all times with the Tenant. All that this letter conveyed was the Landlord may consider negotiating with the Tenant with a view to offering a renewal of the tenancy.

25.I now turn to the letter of 21 April 2001 from the Tenant. I set out its translation in full :

"Mr. Wong,

Re: Shop No.G06-07, G/F, Hollywood Plaza, No.610 Nathan Road, Kln.

Our company received a letter on 19/4/2001 from Messrs. Johnson, Stokes & Master, your company's solicitors , notifying that the tenancy agreement of the captioned shops would expire on 31/10/2001. The contents of the said notice also mentioned that your company would contact our company to discuss matter concerning renewal of the tenancy. Please draft up the new tenancy proposals as soon as possible and inform (us) of the progress of the matter as our company also wishes to continue to work with your company to renew its tenancy of the captioned shops on reasonable terms. Should you have any question or matters regarding the terms of the tenancy, please call up our Ms. Flora Tsang, our Rental Manageress on 27412488. Thank you for your cooperation."

26.Mr Chong submits that this letter amounted (or at least arguably did) to a clear and unambiguous indication of the Tenant's wish to exercise the option to renew under Clause 1(a) of the Fourth Schedule to the Tenancy Agreement. In my judgment, this letter plainly does not have this effect, not even arguably so :

(1) No reference is made in that letter to the exercise of an option to renew. One would have thought that if the Tenant intended to exercise the option under the Tenancy Agreement, it would simply have said so in the straightforward way that commercial men do.

(2) Instead, while I accept that the Tenant expressly stated its wish to continue with the Tenancy, this was not unqualified and certainly not based on the restrictions set out in Clause 1 of the Fourth Schedule to the Tenancy Agreement, to which I have already referred. The wish to renew was only if the tenancy was on "reasonable terms". Moreover, the Landlord was asked to draft new tenancy proposals for the Tenant's consideration. These were somewhat odd statements to make given that, as I have earlier said, if the option was validly exercised, the only term that was negotiable was the new rent.

(3) I am of the view that all that the Tenant was doing by this letter was responding to the said 12 April 2001 letter from the Landlord's solicitors and effectively saying that it was awaiting to hear from the Landlord as to suitable terms for the renewal of the tenancy. The message that the Tenant was sending to the Landlord was that it was willing to renew but only on reasonable terms. This was not the same as the exercise of an option under the Tenancy Agreement in which, as I have said, the only term to negotiate was the new rent. For all that the Landlord could reasonably assume, the Tenant was saying that it wished to negotiate afresh all terms of the tenancy and was awaiting the Landlord's proposals in this regard.

(4) The very highest that the Tenant can argue in my view is that this letter can perhaps be read consistently with an exercise of the option. I do not agree that this is the effect but even if it is, it is ambiguous, because an equally plausible (and in fact in my view right) construction of this letter is that the Tenant wished to negotiate with the Landlord at large on the terms of a new tenancy. The Tenant may well have had its commercial reasons for wishing to negotiate the terms at large because once the option was exercised the Tenant would be bound by all the previous terms of the tenancy save for some very limited exceptions.

(5) Another way of testing the matter is this. Since the valid exercise of an option under Clause 1(a) would result in both the Landlord and the Tenant being bound by a renewed tenancy, one can therefore ask rhetorically : was this the message that the Tenant was conveying to the Landlord by the 21 April 2001 letter? In my view, this was not the message at all. The Tenant was saying that it would like to renew but only if the terms were reasonable.

27.Accordingly, for the above reasons, I am of the view that the Tenant has failed to raise an arguable case that it has validly exercised the option to renew under the Tenancy Agreement or, in terms of a strike out, it is plain and obvious that the Tenant has not validly exercised the option.

Issue 2 : Estoppel and Waiver

28.Mr Chong submits in the event I am not with him on Issue 1, that on the evidence, he is able to make out an arguable case on estoppel and waiver.

29.The Tenant submits essentially as follows :

(1) By the said letter dated 12 April 2001 from the Landlord's solicitors to the Tenant, the Landlord had waived the requirement in the Tenancy Agreement of giving written notice for the exercise of the option.

(2) By the parties' conduct after this letter, in entering into negotiations, the Tenant was led to believe that the Landlord had accepted that the option to renew had been exercised. Both parties, it was said, proceeded on this basis. Thus, the Landlord had either waived its right to assert that the option had not been validly exercised or is estopped from so contending.

These are independent arguments; the Tenant only needs to succeed on one.

30.Whether reliance is placed on estoppel or waiver, both doctrines share this requirement : it is essential that there is an unequivocal or unambiguous act or representation to the effect contended.

31.In my judgment, such an unequivocal or unambiguous act or representation cannot be demonstrated in the present case :

(1) I have already pointed out that by the 12 April 2001 letter, the Landlord was doing nothing more than indicate the possibility that it may negotiate with the Tenant for the renewal of the tenancy. The Landlord was not addressing the option contained in the Tenancy Agreement at all.

(2) The response to this letter was the 22 April 2001 letter from the Tenant. On a true reading of that letter, the Tenant was itself doing no more than indicate its desire to renew the tenancy but only, as I have said, on "reasonable terms". In that regard, the Tenant asked the Landlord to make proposals for the new tenancy. Again, this letter in my view did not deal with the option.

(3) Thus, it is in this context that one comes to view the negotiations which thereafter took place between the Landlord and the Tenant.

(4) The negotiations proceeded on the basis of both parties dealing with and arguing over matters which would not have been relevant if the option to renew had been exercised. I have already referred to the fact that in reality only the rent for the extended period of one year was negotiable had the option been exercised. Instead, the parties negotiated over rent-free periods and the Landlord also wished that the Tenant alter the design of the frontage to the Premises.

(5) Reliance is placed by the Tenant on the following parts of the affirmation of Ms Chang Yuen Mei (who was the retail manager of the Tenant) in which she says in support of her contention that both the Landlord and Tenant treated the 21 April 2001 letter as a valid exercise of the option :

"(8) Although that letter made no express reference to the exercise of the Option to Renew but made reference to drafting a new tenancy agreement, at all material times prior to the re-engagement of JSM on 14 September 2001, both the Defendant and Cheng Siu Chuen, assistant manager of the Agent, in fact treated it as a notice of the Defendant's exercise of an Option to Renew; in this connection, I further depose that:

(a) Sometime in the beginning of June 2001, the Defendant made an arrangement with Cheng of the Agent to meet up at the Agent's Office in Room 1201 Hollywood Plaza to discuss renewal matters;

(b) The meeting was later duly held in the morning of 6 June 2001, and was attended by Ms Flora Tsang of the Defendant and myself on the one side, and Cheng of the Agent on the other;

(c) At this meeting, Ms Tsang and I informed Cheng that the Defendant was serious in its intention to renew the Tenancy Agreement by 1 more year under the Option to Renew;

(d) Cheng informed them that the market rate for a monthly rental of the Shop Premises would be around $260,000 to $280,000, but there was a complicating factor regarding the renewal of the existing Tenancy Agreement in that his new boss (whose identity was not revealed at the time) was not happy with the Defendant's design of the frontage of the Defendant's Shop Premises in the Plaza, and wanted the Defendant to re-renovate the Shop Premises; he explained that:

(i) with the then existing design, 2 glass panels of the Shop Premises inside the Plaza (one of which contained a glass door through which access into the Shop Premises from inside the Plaza could originally be gained) were blocked by white boards, thereby blocking a clear view and access from inside the Plaza;

(ii) his new boss considered the existing lay out ugly and wanted the Defendant at least to unblock the 2 glass panels so as to re-activate the glass door, and to enable shoppers to see through the 2 glass panels;

(e) Ms Tsang and I reminded Mr Cheng that there was no obligation on the part of the Defendant to re-renovate the Shop Premises for the optional year under the existing Tenancy Agreement, and that furthermore, the design plans were approved by the Agent only just over a year ago;

(f) Cheng said that he appreciated the Defendant's reluctance to comply, but because his new boss seemed to be quite firm on his lay out requirement, he would like us to seriously consider re-designing the lay out if we wanted to have any chance of continuing to lease the Shop Premises after the optional 1 year term;

(g) In the end Cheng even suggested that if the Defendant did not want to use re-activate the glass door, at least the Defendant should consider unblocking the 2 panels to create a see through effect or to set-up light boxes behind them, and that drawings should be submitted to him in due course to be forwarded to his boss for further consideration;

(h) After the meeting, I then relayed to Mr Wong what Cheng said; after some time, it was decided by Mr Wong that the Defendant could not accommodate the request for a redesign of the frontage for just the optional year; he indicated to me that the Defendant was willing to consider the request if the Agent would consider granting the Defendant a term of 2 years instead of just an optional term of 1 year; subsequently, Mr Wong ordered our display supervisor, Ma Sze Man, to draw up some design drawing for the frontage for the consideration of the Agent;"

(6) Although references are made to the option, this evidence goes nowhere near establishing an arguable case that there was an unequivocal or unambiguous act or representation on the Landlord's part that it accepted that an option to renew had validly been given.

(7) It is significant that in the correspondence contemporaneous to the negotiations (when the Tenant was legally represented), there is simply no reference to the option having been exercised or that the negotiations had proceeded on this basis. In the letter dated 10 July 2001 from the Tenant's solicitors to the Landlord's agent, it was said, "Our client is the operator of a well-known fashion chain stores who has been an honest tenant of the above property for the past six years. Our client has very sincere intention to renew its tenancy with you at a monthly rental acceptable to both parties. In this connection, we shall be grateful if you will reconsider the matter and arrange a meeting with the representatives of our client to discuss a matter at a time convenient to you.". This was simply not the language of a party who had already renewed the tenancy.

(8) Similarly, the minutes of various meetings held between the parties in June 2001 make no mention of the option or even hint that the option had somehow been exercised and that the parties were proceeding on this basis.

(9) On 10 July 2001 (the same day as the letter from the Tenant's solicitors to the Landlord's agent), a meeting took place between representatives of the Landlord and the Tenant, in which the Landlord's representative (Mr Cheng Siu Chuen) said that there was a potential tenant who was interested in the Premises. What Ms Chang says about the prospective tenant is this :

"At that 4th meeting Mr Cheung revealed that there was a prospective tenant whom the plaintiff considered to be a more prestigious tenant at a more attractive rental and that if the deal fell through on the following Tuesday, he would reconsider the matter of the 'renewal of the Tenancy Agreement'; by his express reference to renewal of the Tenancy Agreement, it would follow that even as late as 10th July 2001, he considered that negotiations pertaining to the option to renew for one year (by our letter of 21st April 2001) had yet to be concluded, in the event that nothing came of the proposed new Tenancy Agreement;"

(10) From this part of the Tenant's evidence, it just cannot be said that there was any unequivocal or unambiguous act or representation on the part of the Landlord to the effect contended. Quite the contrary, in fact.

(11) The Tenant's minutes of that meeting also concluded with the remark "That company has not signed any formal agreement with Hang Lung, but only oral discussion. If that company has not signed confirmation before next Tuesday, Hang Lung will resume negotiations with BESS [the Tenant] on the renewal matters.". This is not the language of a party that has assumed that the valid exercise of the option has taken place.

(12) By a letter dated 7 September 2001, the Tenant's solicitors stated as follows :

"We refer to our previous exchange of correspondence with you on 10th July and 13th July 2001 respectively.

We are instructed that despite repeated negotiations no concluded agreement on the new terms of the tenancy could be reached between you and our client.

In light of the slow progress of the negotiations, our client has little choice but to fall back to the option of renewal of its tenancy for a further term of one year commencing on 1st November 2001 as provided by the Fourth Schedule of the Tenancy Agreement dated 5th October 1999 which has been validly exercised by our client by way of its written request given to you on 21st April 2001.

For saving of costs and time in engaging an independent valuation surveyor to determine the amount of the revised rent for the renewed one year term, our client will be glad to know if you will have any offer to be put forward for its consideration.

We look forward to receiving your early reply.

Meanwhile, all our client's right and interest under the said Tenancy Agreement are expressly reserved."

(13) It is abundantly apparent from the letter that only when the negotiations for a new tenancy had broken down did the Tenant then revert to an allegation that the 21 April 2001 letter constituted an exercise of the option. Significantly, there was no assertion that the parties had all along been proceeding on this basis in their negotiations. In fact, in none of the correspondence after this letter was there such an assertion on the Tenant's part. It is only when Ms Chang made her affirmation dated 17 February 2002 that this allegation first surfaces.

(14) Finally, out of completeness, I should also say that even if the Landlord's representatives had made an unequivocal or unambiguous representation (and as I have held, there is no evidence of this), I doubt whether they had the authority to do so such that the Tenant could rely on it as an unequivocal and unambiguous act or representation on the Landlord's part. I refer in particular to the fact (on the Tenant's own evidence) that before Mr Cheng Siu Chuen could commit the Landlord, he needed his superior's approval. I deal further with this aspect in the discussion of the next issue.

32.For the above reasons I am of the view that there is no arguable case that the Tenant has raised on either estoppel or waiver.

Issue 3 : Oral Agreement

33.This issue can be disposed of quite shortly. Whatever might have been agreed between the Landlord and the Tenant's representatives, it is clear that before the Landlord was to be committed, the representatives had first to obtain the consent of their superiors.

34.The affirmation evidence refers to tentative agreements made "subject to consent of Cheng [Siu Chuen]'s boss" : see paragraph 8(4)(j) of Ms Chang's said affirmation. See also paragraph 8 of the affidavit of Joseph Yu (a director of the Tenant).

35.Further, I have already set out the letter dated 7 September 2001 from the Tenant's solicitors to the Landlord's agent. It is stated there in the clearest possible terms that no concluded agreement had been reached.

36.For these reasons, the Tenant also fails to make out an arguable case on this issue.

Order

37.For the above reasons, I dismiss both appeals. The said Orders of Master Ho will stand. I also make an order nisi as to costs that they be paid by the Tenant to the Landlord, such costs to be taxed if not agreed.

Representation:

Mr K.M. Chong, instructed by Messrs Fung, Wong, Ng & Lam, for the Plaintiff (HCA4725/2001) and the Defendant (HCA4726/2001)

Mr Paul Lam, instructed by Messrs Johnson, Stokes & Master, for the Plaintiff (HCA4726/2001) and the Defendant (HCA4725/2001)