Tsang Sung-ling and Another v. Hei Sheung Fung Restaurant Ltd

HCA000647/1970

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.647 OF 1970

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Coram: Blair-Kerr J. in Court

Date of Judgment:

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JUDGMENT

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1. The plaintiffs are registered owners of the ground, mezzanine and first floors of Nos. 70-76 Nam Cheong Street and the cockloft and first floor of Nos. 223-223A Tai Nam Street, Shamshuipo, Kowloon (hereinafter referred to as "the premises in suit"). In this action, the writ was issued on 6th May 1970. In their statement of claim endorsed thereon, the plaintiffs alleged that the defendant company was monthly tenant of the premises in suit at a rental of $7,260 payable in advance; that the premises in suit were let as business premises; and that they had been used throughout as such; that on 27th October 1969 the plaintiffs had served on the defendant company a notice of termination of tenancy under s.3 of the Tenancy (Notice of Termination) Ordinance 1962, which notice had expired on 30th April 1970; and that the defendant company had failed to deliver up possession pursuant to that notice. The claim was for possession and mesne profits at the rate of $7,260 per month as from the 1st May 1970.

2. On 28th May 1970 the plaintiffs took out a summons under O.14 r.3. On 5th June 1970, the managing director of the defendant company (Ng Yiu Hing) filed an affirmation in which he alleged that:-

"by an oral agreement made on or before the 1st April 1965 made between the first-named plaintiff (Tsang Sung Ling) ....... and the defendant through its then directors Lee Yuen Cheung and Cheung Fat Ping ..... it was agreed that the defendant be granted the tenancy of the said premises for a period of 8 years from 1st March 1965 in consideration of a payment of $60,000 by the defendant for the grant of the said tenancy."

Accordingly, Ng's allegation was that the notice of termination was of no force and effect because the tenancy was for a fixed term exceeding 3 years.

3. In reply to this allegation, Tsang Sung Ling filed an affirmation in which he alleged that:-

"the defendant orally negotiated with me for the plaintiffs to instal a fire-escape ladder, air-conditioning units, refrigeration units, water tank, fuel tank, flushing tank, chimney, etc. at a lump sum fee of $60,000 which was in fact paid on or about 24th March 1965."

He produced a letter dated 11th March 1965 signed by Lee and Cheung in which they confirmed the arrangement made for the installation of the air-conditioning units, etc. and in which they stated:-

"our company is willing to pay you a lump sum of $60,000 as compensation for the damage."

The letter makes no reference whatsoever to an 8 years' tenancy agreement. Tsang denied the suggestion that there had been any oral agreement for an 8 years' tenancy, which he described as "a ridiculous allegation" and "obviously a lie". He went on to say:-

"I also deny that the said $60,000 was paid for any purpose other than that stated in the said letter. It is fantastic for the defendant to suggest that any long 8 years' lease of the valuable premises in this action was never in some way recorded in writing. ........ as (recently) as March 1968 the defendant paid us a two months rent deposit. I ..... attach ..... copy receipt for the ...... deposit ........ There is absolutely no mention of any tenancy for a fixed period (let) alone any term as long as 8 years. The market rental for the premises in this action is $12,000 per month, and delaying tactics by the defendant has already inflicted quite considerable loss and damage on us."

4. The judge was not called upon to decide whether to give leave to defend and if so upon what conditions, because when the plaintiffs' application finally came on for hearing on 20th September 1970, the parties agreed to settle the dispute. An agreed "Tomlin" order was submitted to the court and filed. The order was in the usual form, viz.:-

"........ the plaintiffs and the defendant having agreed to the terms set forth in the schedule hereto, it is ordered that all further proceedings in this action be stayed, except for the purpose of carrying such terms into effect ........"

The terms in the schedule were to the following effect:-

"To secure the due performance and observance of the terms and conditions herein contained (the defendant company) shall on the signing hereof pay to the (plaintiffs) by way of deposit the sum of $86,520."

5. The final term read as follows:-

6. On 29th September 1970 (i.e. 2 days after the date stipulated in the schedule) the defendant company's solicitors forwarded to the plaintiffs' solicitors a cheque for $36,300 drawn by Ng Yiu Hing on his own bank account in payment of the mesne profits owing by the defendant company in respect of the period 1st May 1970 to 31st August 1970 and rent for September 1970 (terms 3 and 4A).

7. The defendant company failed to comply with term 4 viz. to pay to the plaintiffs' solicitors on or before 5th October 1970 the $70,000 deposit. On 7th October 1970 the plaintiffs' solicitors wrote to the defendant company's solicitors as follows:-

"........ the defendant ..... is in breach of clause 4 of the schedule ........ We have instructions to take immediate legal steps unless your client forthwith complies with the ...... Tomlin Order."

8. On 16th October the defendant company's solicitors wrote to the plaintiffs' solicitors as follows:-

The cheque was drawn by Ng on his own bank account.

9. The plaintiffs' solicitors returned the cheque on 19th October and intimated that they were applying to court for judgment because of the defendant company's failure to comply with the terms of the Tomlin order.

10. On 23rd October, the defendant company's solicitors wrote to the plaintiffs' solicitors enclosing a cheque for $70,000 drawn by Ng. This cheque was returned on 26th October.

11. On 27th October the plaintiffs' solicitors took out a summons in which they gave notice that they would, on 7th November 1970, apply to court for an order that they might enter judgment for possession of the premises and for mesne profits at the rate of $7,260 from 1st September 1970 until vacant possession was delivered up by the defendant. This summons was served on the defendant's solicitors on 27th September.

12. On 4th November the defendant took out a summons in which notice was given that on 7th November an application would be made for an extension of time in which to pay the $70,000 deposit and $7,260 being mesne profits for the month of October 1970.

13. In support of this summons, Ng filed an affirmation in which he admitted that the defendant company was in breach of term 4; but he said:-

"........ time was not of the essence of the contract ........ the defendant ........ was not acting deliberately in breach of the court order but ........ the plaintiffs ........ are taking advantage almost of a technicality."

In paragraph 13 of his affirmation he alleged as follows:-

"On the morning of 28th October 1970 I together with a Mr. Lau for and on behalf of the defendant company negotiated with Tsang Sung Ling the plaintiff .......... whereupon the said Tsang Sung Ling orally agreed to accept payment of $70,000 on or before the 31st day of October 1970 on condition that:-

Exhibited to this affirmation there was a copy of a letter dated 28th October 1970 written by the defendant company's solicitors to the plaintiffs' solicitors which read as follows:-

14. On 29th October 1970 the plaintiffs' solicitors wrote to the defendant's solicitors as follows:-

"We have taken our client's instructions on your letter to us of 28th October 1970 and are instructed to emphatically deny the allegation of an agreement between your clients and ours ............ We are further instructed to return your cheque ............."

15. The two summonses came on for hearing before Huggins J. on 11th December 1970. I do not have a transcription of the learned judge's notes, which are written in a form of shorthand which I do not understand. But, according to Mr. Bernacchi who appeared for the defendant company, he took 3 points: (1) that time was not of the essence of the contract between the parties; (2) that because of some technical point possession could not be asked for in the present proceedings and that the proper procedure was to institute a fresh action; and (3) that because of the events of 28th October 1970 the plaintiffs had waived, or could not otherwise rely, on the time limit of 5th October 1970 for the payment of the $70,000 deposit.

16. According to counsel, the learned judge held:

17. The learned judge therefore dismissed the defendant company's summons with costs to the plaintiffs; and paragraphs 2, 3 and 4 of the order read :-

18. The issue as to whether there was an oral agreement was tried by me on 22nd and 23rd April. It was common ground that the onus was upon the defendant company; and Mr. Bernacchi called Ng Yiu Hing (the defendant company's managing director), one Lau Kuen, and Mr. John Ip, sole proprietor of John Ip & Co., the defendant company's solicitors. Mr. Martin Lee for the plaintiffs called the first-named plaintiff, Tsang Sung Ling.

19. It is not clear from the evidence whether the plaintiffs are the registered owners of the whole corner building (70 - 76 Nam Cheong Street and 223 - 223A Tai Nam Street) or whether they own certain floors. They are certainly the owners of the 4th and 7th floors and the defendant company is tenant of these two floors which are used as an office and quarters for staff. It appears that the company has operated a restaurant in the premises in suit since 1963. Ng has been a director of the company since 1963 and managing director since 1966.

20. According to Ng, the company did not have a banking account of its own during the relevant period (September/October 1970) and he (Ng) was financing the company personally, all payments being made by him either by cheques drawn on his personal account or in cash. Ng also admitted in cross-examination that on 22nd September 1970, (the day the Tomlin order was made by consent) he only had between $40,000 and $50,000 in his bank account, and that by the 1st October the balance of his account had fallen to about $30,000. He said that he hoped that his fellow directors would contribute towards the sum of $70,000 which was due to be paid by 5th October; but that this did not materialise.

21. Ng began his evidence by stating that the reason he was unable to pay the $70,000 on 5th October was because he had decided to purchase for $40,000 the shares of a fellow director who was retiring from the company. The transaction was negotiated towards the end of September (i.e. about a week after the Tomlin Order) and the share transfer was put through on 2nd October. The impression he tried to give was that the $40,000 was paid at that time. But, upon further questioning in cross-examination, he said that the arrangement which he had with his fellow director was that the $40,000 should be paid by instalments, the first instalment being due in November 1970, and that in fact, to date, he has paid 3 instalments and that the fourth and last instalment will be paid in May. It therefore appears that the purchase of shares by Ng really had nothing to do with the defendant company's inability to pay the $70,000 on 5th October; and Ng eventually admitted this to be so.

22. Lau Kuen said that he operated a tailer's business in Ice House Street. Later, he said that he also acted as a broker in property transactions. Finally, he said that he frequently met Ng and other friends in the Mei Sheung Fung Restaurant in the morning and discussed the possibility of doing business of various sorts; and he gave two examples. He said he sometimes arranged for electrical work to be done and for the installation of air-conditioners.

23. Tsang was not at ease in the witness box. On one occasion when he was being pressed hard in cross-examination he said: "I am trying to co-operate with you"; and I believe he was telling the truth. In matters of detail his memory was not very good; and I do not think that he was a very clever person. Also, I do not think he was accustomed to giving evidence; but I did not get the impression, even for a moment, that he was consciously lying. I am convinced that he did not understand many of the questions put by counsel for the defendant company. But, like so many Chinese witnesses, rather than lose face by saying: "I do not understand" or "I do not remember" he sometimes said "yes" or "no" or otherwise tried to give an answer.

24. Tsang was asked in cross-examination whether he regarded Lau as "an intermediary" during the meeting on 28th October. He answered "yes" to that question and added: "that is to implore me on behalf of the other side."

25. Ng and Lau both emphasised in evidence that they were very good friends. Tsang had only met Lau on one occasion prior to 28th October. It is difficult to see how Tsang and Lau could even be described as acquaintances. It was never suggested to Lau himself that his function on 28th October was that of an intermediary; and, on the evidence, there is not the slightest ground for describing him as such. He had no connection with the defendant company. But he was a close friend of Ng. He was asked by Ng to accompany him to Tsang's. He took an active part in "imploring" Tsang to accept the deposit out of time; and I am in no doubt whatsoever that Ng's object in bringing Lau to Tsang's office on 28th October was so that he could have a second witness to call to corroborate whatever he (Ng) decided to say in evidence at a later date. On the evidence there was no other reason for him accompanying Ng to see Tsang at all. Counsel for the defendant company in his closing address submitted that I should regard Lau as an independant witness. Having heard the evidence and having seen Lau testify, no court could possibly regard Lau as such. Unquestionably, he came to court to give evidence "for" Ng.

26. Ng was clearly in breach of the terms of the Tomlin order. He had attempted on two occasions to make payment by cheques out of time; and his cheques had been returned. One cheque was post-dated to 31st October. The other was dated 23rd October. We only have his word for it that on 23rd October he did have $70,000 in the bank to meet that cheque. He did not produce his bank statement in corroboration. Furthermore, there is no doubt in my mind that on 27th October 1970, Ng knew that a summons for judgment for possession had been served on his solicitors. In evidence, he denied that this was so. But Lau admitted in cross-examination that when he met Ng at the defendant company's restaurant before they went to see Tsang, Ng told him (Lau) that the defendant company's solicitors had been served with a summons for judgment.

27. However, there was no mention of the summons for judgment at the meeting with Tsang, and Ng did not allege in evidence that Tsang promised to withdraw the summons if the cheque for $77,260 was cleared, as alleged in Ip & Co.'s letter of 28th October. Mr. John Ip said that the second paragraph of his firm's letter "paraphrased in legal terms" the instructions which his firm had received. It is not clear to be how he knew what instructions his firm had received. Ng dealt with a clerk (a Mr. Yeung) but the defendant company did not call him to testify as to what instructions he received from Ng. The letter was not drafted by Mr. Ip. At least, his initials do not appear on it; and there is nothing to suggest that he did more than sign the letter. He said that he had no actual recollection "of the matter". Presumably, this allegation that Tsang promised to withdraw the summons was put in the letter by the clerk who drafted it. However, what matters to me in this inquiry is that the summons for judgment had in fact been served on the defendant company's solicitors on 27th October and that they (presumably through their clerk Mr. Yeung) immediately communicated this fact to Ng.

28. Ng said in evidence that his company had spent about $1,000,000 in establishing the restaurant business. Knowing that the sole purpose of this action was to obtain vacant possession of the premises in suit; knowing that he was in breach of the Tomlin order; that his two cheques had been returned; that on 27th October a summons for judgment had been served on the defendant company's solicitors, Ng had the very strongest of reasons to grasp at any evidence, however tenuous, in the hope that it might save his company from losing possession.

29. On the other hand, what had Tsang to gain by suddenly changing his mind 24 hours after giving his solicitors instructions to issue the summons for judgment?

30. There is not a scrap of evidence to suggest that Tsang took the initiative in arranging the meeting. I accept his evidence that Ng rang him shortly after 9 a.m. on the morning of 28th October and said that he (Ng) was coming up to speak to Tsang; that Ng then rang off; and that he appeared in Tsang's office shortly afterwards with Lau. Tsang had no prior notice that Ng was coming to see him. I accept the evidence of Ng, Lau and Tsang that Ng and Lau both "implored" Tsang to accept the late payment of the $70,000 deposit. Lau said that this imploring lasted for "several five minutes". I suppose one is entitled to say that this is a colloquial way of saying "20 minutes to half an hour." At any rate this "imploring" continued for some considerable time.

31. Ng's evidence was that the restaurant was of no use to the defendant company without the office and quarters on the 4th and 7th floors; that he would never have paid Tsang the outstanding rent in respect of the office and quarters if he had not had an assurance from Tsang that he was prepared to accept late payment of the $70,000 deposit; and that it was Tsang who, eventually, said, in effect: "all right, provided you pay up the outstanding rent ($1,460) for September and October in respect of the office and quarters and the rent ($7,260) for October in respect of the restaurant, I am prepared to accept the $70,000 provided it is paid before the end of the month and provided you make all payments in respect of the premises in suit through your solicitors."

32. I am clearly of the opinion that Tsang said nothing which could, by any stretch of imagination, be interpreted in this way. He did accept payment of the outstanding rent ($1,460) in respect of the office and quarters; and he gave Ng receipts therefor. The rent was due and owing. The plaintiffs were entitled to payment. This was not a quid pro quo for Tsang's agreement. Tsang never agreed to accept late payment of the deposit. I agree with Mr. Martin Lee's submission that Ng's payment was an attempt to sweeten Tsang. I would go further. In my view this meeting was a desperate last minute attempt on the part of Ng either to persuade Tsang to accept the deposit or trick him into saying something or doing something which could be used against him later.

33. From the beginning, Tsang's approach to Ng's imploring was in effect: "As regards the premises in suit, we both have solicitors, and I cannot deal with you direct." But during the course of this "imploring" Tsang got rather exasperated and he said: "If you want to pay, pay to your solicitors." Indeed, I think Tsang admitted in evidence that he said this twice. But that is all he did say. I reject all the other embellishments given in evidence by Lau and Ng.

34. However, once Ng got Tsang to say "if you want to pay, pay to your solicitors" (in the presence, of course, of Ng's good friend Lau) he left Tsang's office and went to the offices of the defendant company's solicitors and told the clerk (Yeung) this story that Tsang had agreed to accept late payment.

35. It is far from clear on the evidence from where Ng got the money to enable him to put his solicitors in funds so that they could, that very day, send the plaintiffs' solicitors their cheque. As I have said, Mr. John Ip said he had no personal recollection of signing the actual cheque; but he assumed that he would have adopted the usual practice of checking the clients' ledger account to ensure that there was sufficient funds in it so that he would be justified in drawing a cheque for $77,260 on his firm's bank account. But, as I have said, none of his staff were called as witnesses.

36. As regards Ng, I have no confidence at all in his evidence. He said that he had cashed a cheque for $50,000 on the afternoon of 27th October, and that the balance of his account (after cashing this cheque) exceeded $20,000. At first he said that he intended to show Tsang the $50,000 in cash "to impress the landlord." In other words, to tempt Tsang into accepting late payment. If that was so, and if he in fact did have more than $70,000 in his bank account on 27th October one would think it would have been far better, from his point of view, for him to have had the full amount of $70,000 ready in his hand when he met Tsang.

37. When this was put to him in cross-examination by Mr. Martin Lee, Ng changed his story and said that it just "happened" that he had drawn the money out that day. When asked what that meant he said: "I drew the money that day for some other purpose but the money remained in my pocket the following day." When asked what was the "other purpose", he said that he required the money to buy jewellery for his wife. When asked to confirm that, he said that the cashing of the cheque was "to do business"; and finally he said that it was to buy jewellery for his wife. He also said that when he drew the cheque he had no idea of taking this money with him when he went to see Tsang the following day.

38. Ng said that, without saying to Tsang how much he actually had on his person, he brandished this large amount of cash before Tsang. This is not confirmed by Lau and Tsang; and I do not accpet Ng's evidence. Lau said that when it came to paying this $1,460 for the quarters, Ng did not even have enough money on his person to do that; that he only had about $900; and that Ng went down to the restaurant to get the balance. Lau also said that after the interview with Tsang, Ng asked Lau to wait for him in the restaurant; and that he (Ng) went elsewhere for a time. Lau's impression was that Ng was obtaining the money, (which he described as "several tens of thousands of dollars") from somewhere. Where Ng got the money from (if he did got it) is far from clear.

39. However, how Ng managed to put his solicitors in funds is not my primary concern. What I am concerned with is simply this: When (after being pestered for the better part of twenty minutes or so) Tsang said: "If you want to pay, pay to your solicitors", did he intend to agree to accepting late payment of the $70,000 deposit either conditionally or unconditionally?

40. I am clearly of the opinion that he did not. And as for Ng, I am far from satisfied that this meeting on the morning of 28th October was not arranged by Ng in the hope that Tsang would say something from which it might be argued that he (Tsang) had waived the time limit for the payment of the deposit under the Tomlin order. But, even if we assume that it was nothing but a desperate, although genuine, last gamble in the hope that Tsang might really change his mind, the most charitable thing that can be said for Ng is that he was "grasping at a straw", and that he had no reasonable ground for believing that when Tsang said: "If you want to pay, pay to your solicitors", he was thereby agreeing to accept late payment of the deposit.

41. I find that there was no oral agreement as alleged in paragraph 13 of Ng's affirmation. The issue is therefore determined in favour of the plaintiffs.

42. This being so, the plaintiffs are at liberty to enter final judgment against the defendant company in the terms sought by the plaintiffs' summons of 27th October 1970.

43. The defendant company will pay the plaintiffs' costs.

Representation:

Mr. Martin Lee (Messrs. C.Y. Kwan & Co.) for Plaintiffs.

Mr. B. Bernacchi, Q.C. and Patrick Woo (Messrs. John Ip & Co.) for Defendant.