王耀清及另一人 v. 蔡振宗及另一人
Read the full judgment text of DCCJ 3660/2003 on BabelCite. This District Court judgment.
1. This is a claim by the Plaintiffs against the Defendants for arrears of rent for the period from 21 December 2002 to 20 January 2003 and for possession of the premises. The Plaintiffs also claim for mesne profit for the period from 21 January 2003 to the date of delivery up of vacant possession and costs. Other relief sought include disposition of the Defendants’ possessions left on the property and recovery of unpaid electricity bill in the sum of $1,717 and gas bill in the sum of $650 fo
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DCCJ3660/2003 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3660 OF 2003 -------------------- BETWEEN
-------------------- Coram : Her Honour Judge C.B. Chan in Court Dates of Trial : 11th, 12th, 13th and 14th January 2005 Date of Handing down Judgment : 18th April 2005 JUDGMENT 1.This is a claim by the Plaintiffs against the Defendants for arrears of rent for the period from 21 December 2002 to 20 January 2003 and for possession of the premises. The Plaintiffs also claim for mesne profit for the period from 21 January 2003 to the date of delivery up of vacant possession and costs. Other relief sought include disposition of the Defendants’ possessions left on the property and recovery of unpaid electricity bill in the sum of $1,717 and gas bill in the sum of $650 for the duration of the occupation of the premises by the Defendants. 2.The Plaintiffs also claim recovery of repair and renovation costs to the property as a result of the damage to the property caused by the Defendants as particularised in the Statement of Claim totalling $55,000. Background 3.The Plaintiffs are the registered owners of the premises known as Flat C, 3rd Floor, No. 9 Fa Yuen Street, Kowloon (the “Premises”). On 1 November 2002 the Plaintiffs let the Premises to the Defendants under a tenancy agreement for a term of two years commencing from 21 November 2002 to 20 November 2004 at a rent of HK$9,200 per month. 4.The Defendants’ case as pleaded in their Defence and Counterclaim is one of misrepresentation and breach of contract. They pleaded that prior to the execution of the Tenancy Agreement on each and every occasion, when they inspected the Premises the Defendants expressly made known to the Plaintiffs’ Agent that they were looking for rental premises for the purpose of carrying out the business of an internet game centre (the “Business”). The Plaintiffs’ Agent represented to the Defendants that the Premises had been let for a commercial purpose and was therefore suitable for the Defendants to carry out the Business in the Premises. 5.On the date of signing of the Tenancy Agreement on 31 October 2002, the Defendants made enquiries of the Plaintiffs as to whether it was permissible to carry out the Business in the Premises. In order to induce the Defendants to enter into the Tenancy Agreement, the Plaintiffs represented to the Defendants and thereby warranted to the Defendants that the Premises were let for a commercial purpose and they were therefore permitted to run the Business. The Plaintiffs further told the Defendants that the Premises were used for the business of beauty treatment centre by the previous tenant. 6.The case related to breach of Tenancy Agreement is pleaded in the terms hereunder. Upon the signing of the Tenancy Agreement in paragraph 8 thereof in the blank space therein the user of “internet game centre” was expressly entered there by the Plaintiffs’ agent Mr. Chan. The Defendants allege that there was an express incorporation of this user into the Tenancy Agreement as requested by the Defendants and the Plaintiffs agreed to it. They alleged that the Plaintiffs from the Tenancy Agreement subsequently unilaterally removed these words of “internet game centre” after execution of the Tenancy Agreement, without their consent and knowledge. Thus the Plaintiffs breached the terms of the Tenancy Agreement entered into between them. 7.It is the Defendants’ case that they acted on the faith of the said representation and warranties, when they entered into the Tenancy Agreement and subsequently incurred a total sum of HK$391,884.00. Particulars of this are set out in paragraph 2 of the Supplemental Witness Statement of the 1st named Defendant dated 12 July 2004. 8.Since then the Defendants discovered that the said representations were untrue, the Defendants evinced their intention to repudiate the Tenancy Agreement by non-payment of monthly rent on 21 December 2002. 9.The Defendants counterclaim for:-
10.The Issues in the Trial
11.The Defendants do not dispute the Plaintiff’s claim for the expenses for reinstatement of premises nor the fact that the delivery up of premises by the Defendants were delayed by two months counting from the date when they indicated to the Plaintiffs they wanted to surrender the premises. The Defendants’ Counsel stated that the Defendants would be responsible for these items. The Evidence 12.Both Plaintiffs gave evidence. They adduced their witness statements into evidence as their evidence-in-chief and supplemented their evidence-in-chief by oral evidence. Both Defendants gave evidence. Their evidence in chief consisted of the contents of their witness statements that were adduced into evidence and their evidence upon cross-examination. The Defendants called their estate agent Ms. Lui Yu Ying to give evidence. Evidence of Wong Yiu Ching (王耀清) Related to the alleged Representations 13.On about August 2002 he entrusted the search of a tenant to estate agent Mr. Chan Cham Kong (“Mr. Chan”) of Kam Mong estate Agency. Mr. Chan later informed them that a prospective tenant was interested in renting the said Premises for use as an internet game centre. The prospective tenants were the Defendants. Immediately hearing that his wife the second named Plaintiff immediately told Mr. Chan that the Plaintiffs did not know whether the property could be used as an internet game centre. She stated that it is far better if the tenant would not rent the Premises. Further, she stated that as the Premises are on the 3rd floor, the internet game centre would be on the 3rd floor. There is a street gate outside the entrance of the building where the Premises are. The Incorporated Owners would not permit this and they stated that they would not guarantee whether the property could be used as an internet game centre. 14.On the 31 October, Mr. Chan stated that the Defendants wanted to rent the Premises and arranged for the Plaintiffs to attend to the offices of Kam Mong Estate Agency at Fa Yuen Street to sign the tenancy agreement. When they got there they were brought to the offices of another estate agent namely Shun Tai Estate Agent. They were introduced to the estate agent one Ms. Lui Yu Ying of Shun Tai Estate Agent. 15.At this meeting, the Plaintiffs continued to state that they did not guarantee that the Premises could be used as an internet game centre. The 1st named Defendant stated that there should not be any difficulty about the use of the Premises as an internet game centre because they learnt from Shun Tai Estate Agent that the former tenant used the Premises as a beauty treatment centre. However the Plaintiffs stated that they had clearly informed the Defendants that were the Defendants to encounter any difficulties related to the use of the Premises as an internet game centre, they would not be responsible. The Plaintiffs requested the Defendants to carefully consider whether they should rent the said Premises. 16.The 1st named Defendant stated that that he had practical experience related to the running of an internet game centre. He also had a group of clients. With some advertisement, he said that there should not be any problems. The 1st named Plaintiff stated that the Deed of Mutual Covenant was written in English and they could not read English. Hence they did not know whether the Premises could be used for business purposes. 17.The 1st named Plaintiff and Yeung Wo Tai stated in evidence that their 1st tenant, namely the one before the one that used it as a beauty treatment centre, used the Premises as a residence. They did not inform the Defendants that this 1st tenant had used the Premises as a barbershop. The allegation by the 1st named Defendant that they said this is not correct. 18.It was subject to the statements made by the Plaintiffs aforesaid that Mr. Chan wrote the tenancy agreement. 19.The Plaintiffs denied that they had raised the rent by HK$200.00 after learning that the Premises would be used for the Business. The 1st named Plaintiff said that they had set the price at HK$9,500.00 after checking with the average rent for other premises within the vicinity. The 1st named Plaintiff added that the Defendants initially offered HK$9,000.00 for the rent, but he only agreed to reduce the rent by HK$300.00. 20.The Plaintiffs both stated that after Mr. Chan completed the drafting of the Tenancy Agreement, they read that and saw that Mr. Chan wrote in para 8 of the Tenancy Agreement the words “internet game centre” which showed that the only use of the Premises would be for that use. As the Plaintiffs had stated that they could not guarantee that the Premises could be used as an internet game centre, he asked for the words “internet game centre” to be coloured over by correcting ink. In the presence of the Defendants that was done and Mr. Chan wrote instead a triangle in that space. Nevertheless, the parties were not asked by Mr. Chan to initial their signature on the amended part of Clause 8. 21.After the Tenancy Agreements were signed in duplicate, the 2nd named Plaintiffs took them with her for stamping. After stamping on 1st November 2002, the Defendant’s copy was delivered to Mr. Chan for the Defendants. Events Subsequent to the Signing of the Tenancy Agreement 22.The parties agreed to a 20-day rent-free period. The Defendants paid two months’ deposit in the sum of $18,400. After that the 1st named Plaintiff gave the Defendants the keys of the Premises. About 10 days after the date of signing of the Tenancy Agreement, The 1st named Defendant telephoned the 1st named Plaintiff and stated that he wanted to apply for the increase of the supply of electricity to the Premises. He required the permission of the Incorporated Owners and the Management Office. The 1st named Plaintiff discussed this with the Chairman of the Owner’s Committee and eventually the Chairman stated that permission could not be granted. 23.The 1st named Plaintiff informed the 1st named Defendant of that fact and suggested to the 1st named Defendant that as this could not be done, he would return the deposit to the Defendants and rescind the Tenancy Agreement. The 1st named Defendant stated that he did not need the help of the 1st named Plaintiff in relation to this matter. They will do it themselves. 24.On the 12th December, the first month’s rent was due. On the 17th December he telephoned the 1st named Defendant to ask about the rent. The 1st named Defendant asked for an extension of the rent-free period to the 1st January. They said that they will pay the rent into the 1st named Plaintiff’s bank account on 1st January. On the 3rd January the 1st named Plaintiff went to the bank and found that the rent had not been paid. On the 6th January he went to the Lands Tribunal to file this claim, which had subsequently been transferred to this Court. Surrender of the Premises 25.On 15 January 2003, the 1st named Defendant stated that the Defendants would surrender the Premises to the Plaintiffs on 26 January 2003. On 26 January 2003, he went to the Premises and found that the Defendants with some workmen were removing the electricity main fuse board. The 1st named Plaintiff asked them why they did that. They informed him that it was not yet time for them to deliver the Premises to them. By then, everything had been taken away from the Premises including computers, tables etc. He found the state of the premises as seen in the photographs at pages 359 to 363 of the BD. The walls were painted black with drawings on them, the wiring was exposed and the Premises were in a bad state of disrepair and damage as shown in the photographs. 26.On 26 March 2003, the Plaintiffs received a letter from the Defendant’s solicitors informing them that they could collect the keys of the Premises from their offices. On 1 April 2003, the Plaintiffs went to the Defendants’ solicitors and collected the keys to the Premises. Upon entry into the Premises they found the items of disrepair were that listed in paragraph 12 of his witness statement. 27.The Plaintiffs carried out the renovations required as stated in para 13 of the 1st named Plaintiff’s witness statement. He submitted the receipts related to the repair and renovations. 28.He further found an outstanding electricity bill in the sum of $1,717 and a gas bill in the sum of $650. It is agreed between the parties that the gas bill is no longer pursued. Further it is not in dispute that the Defendants paid the China Light and Power a deposit in the sum of $1,630, which should be set off against the electricity charges outstanding. Evidence of Yeung Wo Tai Related to the Alleged Misrepresentation 29.Her evidence supports that of the 1st named Plaintiff. She was the one to whom Mr. Chan the Estate Agent first telephoned about the Defendants as prospective tenants. She stated that Mr. Chan told her that the prospective tenants, namely the Defendants were young and they wanted to rent the Premises for use as an internet game centre. They stated that the Premises had a large floor area and was close to a cinema. She immediately told Mr. Chan that the Premises could not be used as an internet game centre because the Premises are on the 3rd floor and there is a street gate. She was not sure if the Incorporated Owners would permit such use. 30.Subsequently on a second phone call of Mr. Chan she stated the same. Mr. Chan stated that the Defendants had looked at other properties but they formed the view that the Premises were the most suitable for the stated use, that is why they still wanted to rent the Premises as an internet game centre. Upon the persuasion of Mr. Chan she agreed to rent the Premises to the Defendants. She had pointed out to the Defendants that she would not guarantee that the Premises could be used as an internet game centre. The Plaintiffs would not be responsible for the loss of the Defendants. 31.As regards the rest of her evidence it supports that of the 1st named Plaintiff. The 1st named Defendant’s Evidence Related to the Alleged Misrepresentation 32.He states that he and Yu Chun Fai were looking for premises to operate an internet game centre. They approached Ms. Lui Yu Ying at her Estate Agency. Through her introduction they went to the Premises and viewed it. On each occasion when they viewed the Premises, he informed Mr. Chan Cham Kong, the Plaintiffs’ Estate Agent that he intended to use the Premises as an internet game centre. 33.The 1st named Defendant stated that the Plaintiffs’ estate agent Mr. Chan replied that since the Premises were used as a beauty treatment centre by the previous tenant, there should be no problem for the same to be used for an internet game centre. 34.The 1st named Defendant also said that the rent was originally stated to be HK$9,000.00 per month. However when the Plaintiffs learned about the intended use of the Premises, they increased the rent by HK$200.00. 35.On the second inspection of the Premises, the main purpose was to do some measurement for the purpose of renovation. The Defendants had specifically asked Mr. Chan whether some of the partition walls could be removed. Mr. Chan said that the Plaintiffs had no objection to it. 36.On 31 October 2002, before the Tenancy Agreement was signed by the parties, the Plaintiffs had again represented to the Defendants that the Premises could be used for the business purposes as an internet game centre because the previous tenants had used the same as a barbershop and beauty treatment centre. 37.The 1st named Defendant said that without such a warranty on the user from the Plaintiffs, the Defendants would not have entered into the Tenancy Agreement. 38.To safeguard their rights, before the execution of the Tenancy Agreement he requested that these words be included in the Clause 8 of the Tenancy Agreement at the time of its execution. The Plaintiffs agreed there have the words “internet game centre” were added therein. The Plaintiffs afterwards unilaterally deleted the words “internet game centre” from Clause 8 by correction fluid without the Defendants’ consent, thereby constituting a breach of the Tenancy Agreement. 39.The 1st named Defendant stated that, if they had agreed to the said deletion of the words “internet game centre” from Clause 8, they would have initialed on the correction in that clause as had been done on the corrections in other clauses of the Tenancy Agreement. 40.The 1st named Defendant added that all amendments by correction fluid, apart form Clause 8, were made before execution of the Tenancy Agreement. 41.Under cross-examination, the 1st named Defendant could not deny that on Exhibit D1, which is the original Tenancy Agreement provided by the Defendants, the following points can be noted:-
42.The 1st named Defendant stated that he and the 2nd named Defendant did not notice that the words “internet game centre” were deleted from the Tenancy Agreement until about 18 November 2002. Events Subsequent to the Execution of the Tenancy Agreement 43.He stated that on or about 18th November he applied to the electricity company to increase the capacity of electricity supply to the Premises to enable the operation of 10 computers. He also contacted the Management Office of the building for written permission to make this application. For that purpose, he asked Mr. Yu Chun Fai to obtain the Tenancy Agreement from his home. It was then that he first noticed that the words “internet game centre” had been deleted from clause 8 of the Tenancy Agreement. 44.On 1 December 2002, the Management Company of the building rejected the Defendants’ application for permission to increase the capacity of electricity supply to the Premises and notified the Defendants that the Premises could only be used as a residence and could not be used for business purposes. 45.After the said notice, the 1st named Defendant requested to meet with the Plaintiffs through Mr. Chan. They met on 14 December 2002, and the Plaintiffs provided him with a copy of the Assignment to confirm that the Premises could be used for commercial purpose. The 1st named Defendant added in oral evidence that he did not arrange to meet the Plaintiffs via Ms. Lui as it was too troublesome as Ms. Lui was busy. Subsequently under cross-examination the 1st named Defendant stated that the Plaintiffs did not provide him with a copy of the Assignment. 46.On or about 18th December 2002, the Management Company sent the 1st named Defendant a copy of one page from the Deed of Mutual Covenant (“DMC”) which shows that the Premises could only be used for residential purpose. 47.The 1st named Defendant admitted that he did not pay rent on 21 December 2002, but instead asked the Plaintiffs to extend the rent-free period from 20 days to 1 month. 48.On 2 January 2003, a written notice from the Management Company was received by the 1st named Defendant which again specified that the Premises could only be used for residential purpose. 49.The 1st named Defendant did not do anything after receiving such notice. They had decided not to pay rent to the Plaintiffs when the same was due on 21 December 2002, since the Premises could not be used for the Business. However the Defendants decided to and did commence business as an internet game centre on 24 December 2002. From 2 January 2003, the Management Office disallowed entry to their customers into the building. They then terminated their business at the end of January 2003. 50.After receiving the notice from the Lands Tribunal in early January 2003 regarding the Plaintiffs’ claim for rent in arrears, the 1st named Defendant asked the Plaintiffs to deduct the rent from the rental deposit, and the Defendants would move out of the Premises. 51.The 1st named Defendant admitted that the Defendants did not move out of the Premises until 25 March 2003. The reason was, there were still a lot of furniture and computers in the Premises, and the 1st named Defendant had to throw them away by himself. 52.He was cross-examined in relation to paragraph 13 of his witness statement where he stated that on about the 14th December he approached Ms. Lui to ask her to arrange for him to see the Plaintiffs to discuss this. However, when giving oral evidence, he stated that he approached Mr. Chan to do that. It was put to him by the Plaintiffs’ Counsel that he changed his evidence when he gave evidence-in-chief because he heard Ms. Lui give evidence that she did not know he was dissatisfied or had a complaint against the landlord. Under re-examination by his Counsel he changed his evidence yet again and stated that he telephoned Ms. Lui to ask her to arrange a meeting for him through Mr. Chan. However she had a client so he telephoned Mr. Chan direct. 53.Under cross-examination it was put to him and he agreed that on the 1st December, he had oral notice that the Premises could not be used for business purposes and in early December he was given a page of the Deed of Mutual Covenant which stated that the user of the Premises was for residential purposes and again on the 2nd January he received a letter from the Incorporated Owners notifying him that the Premises could not be used for business purposes. Yet from the 19th December onwards the Defendants were still purchasing computer and computer accessories. This is seen from the receipts at pages 343 to 346 of the BD. He confirmed that was the case. In the same way at pages 394 to 395 of the BD, which shows the record of purchase of computer games software, most of the computer games were purchased in mid December. He confirmed that. He was questioned that after receiving the oral notice of the permitted use of the Premises, for residential use, from the Management Office on the 1st December, he still invested in the business to be operated on the Premises. He confirmed that. The evidence showed that on the 31st January 2002, he still purchased computer games. The 1st named Defendant explained that the purchase at the price of $180 was for a watch with a limited edition. As they still had money in the partnership, they invested in that. Some of the games were purchased on the 31st January 2003 after the Defendants had ceased business. He stated that these were up-dates of the games software’s and had to be purchased. He stated that they had to use these up-dates to play these games themselves. 54.Under cross-examination the 1st named Defendant admitted that he had decided not to pay rent before the 21 December 2002 when the rent was due and payable but despite that he proceeded to commence the business on the 24 December 2002. 55.When cross-examined on what happened to some of the furniture and the chairs, he was asked whether he considered that they could have re-used the chairs, tables, games, and computers as capital investment into another internet games centre. He said no. He stated that the chairs were broken and of poor quality. He said that about 10 odd of them had loose stitches. When asked whether he was able to use them when they operated the internet game centre, he then changed his evidence somewhat and said that they could not be raised up or down but were still usable. 56.In the course of his evidence it became clear that the investment into the internet café came from a number of investors, namely the 1st named Defendant, the 2nd named Defendant, one surnamed Chan and one surnamed Chu. Evidence of Lui Yu Ying 57.At the material time in 2002 to 2003 and at present, Lui Yu Ying (hereinafter referred to as “Ms. Lui”) is a partner of Shun Tai Estate Agent through whom the Defendants was introduced to the Plaintiffs and their Estate Agent Mr. Chan. She states that the Defendants walked into her company to look for the rental of premises to operate an internet game centre. They did not state the type of internet game centre. They stated the size of the premises required was about 800 sq. ft and their budget was $10,000.00. She did not have suitable premises so she sought assistance of Mr. Chan Cham Kong and his Estate Agency. 58.Ms. Lui brought the Defendants to view the Premises together with Mr. Chan. She saw that there were signs it had been used as a beauty treatment centre. There was a business nameplate outside the door. The asking rent of the Premises was $9,000 per month. At the time of the discussions the use of internet game centre was mentioned. Ms. Lui was asked by the Defendants’ Counsel whether Mr. Chan stated that the use of the Premises as an internet game centre and for business purposes was alright. She stated that after Mr. Chan knew that the Premises was to be used as an internet game centre, he came back to say that the Landlords said that as the Premises are to be used for commercial use, they want to increase the asking rent by $200 to $9,200 per month. There was no objection by the Plaintiffs to the proposed use nor was there any guarantee mentioned related to such use. No one mentioned whether the Premises could be used for commercial purposes. She could not remember whether there was mention of the former use of the Premises by previous tenants. She stated that no mention was made about what is an internet game centre or what it would be like when it was used as an internet game centre. Subsequently, under cross-examination the Defendants’ Counsel referred Ms. Lui to the Statement she made to the Estate Agents Authority written before she knew of the substance of the dispute between the parties herein. With reference to her answer to the 2nd question in the said Statement at page 374 of the Bundle when she was asked whether the Landlords stated the user of the Premises, her answer written in the Statement was that the Landlord’s wife said that the former tenant had used the Premises for commercial purposes and she felt that that would not be a problem. She was again referred to her statement at page 372 of the BD where she stated that the 1st named Defendant said they wanted to use the Premises as an internet game centre, the Landlord said “yes”, the previous tenant had used it for commercial use. She was then referred to her earlier answer to the question whether there was mention at the time of execution of the Tenancy Agreement that the Premises could be used as an internet game centre and she said “no”. She then stated, “yes, it was mentioned.” She stated that the 1st named Defendant said that the Premises would be used as an internet game centre. When she was asked, “what was the response of the Landlord?” She said, “If they signed the Tenancy Agreement, they must mean “yes””. 59.The Tenancy Agreement was signed in her office. At the time it was Mr. Chan who attended to the drafting of the Tenancy Agreement and the execution of the Tenancy Agreement. During the whole process there were times when she had walk-in clients or was attending to the telephone. There were times when she had not heard the conversation. However under re-examination she stated that during the time of the execution of the Tenancy Agreement, she did not have walk-in clients. As regards whether there were telephone calls at that time, she could not say. She could not remember anything about paragraph 8 of the Tenancy Agreement whether there was any correction or amendment before the execution of the Tenancy Agreement. 60.In relation to Clause 8, where there was a correction by white correcting ink and on it a triangle was written, she stated that she did not know under what circumstances it happened. Prior to the execution of the Tenancy Agreement nothing was stated related to any dispute as regards what was written in the Tenancy Agreement. She did not know when the countersignatures were placed on the Tenancy Agreement. She has never seen the Tenancy Agreement from the time of its execution to the complaint received in relation to this transaction. Under re-examination, she stated that she did not see the execution of the Tenancy Agreement. Mr. Chan was handling that. He is an Estate Agent. She did not need to assist him. In other words, she would attend to other clients of hers when there was the need. She further stated that at the time of the execution of the Tenancy Agreement she could not hear everything in the conversation between the parties. When asked whether she could hear everything in their conversation, she said, “Of course not everything, not every word spoken would enter my brain. She was further asked in re-examination as regards whether there was any objection to the inclusion of the words “internet game centre’ in Clause 8, she said, “no”. 61.She stated that after the signing of the Tenancy Agreement, she knew that the Plaintiffs chased the Defendants for rent and the Defendants stated that they could not obtain permission to increase the capacity of the supply of electricity into the Premises. The Defendants did not approach her to contact the Plaintiffs in relation to their complaints. Evidence of the 2nd named Defendant In relation to the Alleged Misrepresentation 62.He is the partner of the 1st named Defendant in relation to the intended business of the internet game centre. He visited the Premises twice and on the date of the execution of the Tenancy Agreement he did not view the Premises. He stated that they told Mr. Chan they wanted to use the Premises as an internet game centre. In relation to the discussion about the rent, the Plaintiffs asked for $9,000 per month. However when he knew they wanted to rent the Premises for commercial use, they asked for an increased rental. 63.The Plaintiffs knew that the Defendants wanted to rent the Premises as an internet game centre. They were concerned in case it was used for pornography. The Defendants explained to them that it was for young people to play internet games. After that the Plaintiffs’ reaction was not so concerned. When they asked the Plaintiffs whether they could use the Premises for commercial use, the Plaintiffs said that the former tenants had used it as a beauty treatment centre and the one before that had used it as a barbershop. 64.In relation to Clause 8 of the Tenancy Agreement, he stated that when Mr. Chan wrote the clause, there was no stated use. The 1st named Defendant wanted to insert the use specifically as internet game centre. Apart from Clause 8 there were other places where there were alterations. In relation to the alteration at Clause 9, he could not remember whether the alteration was made before or after the execution. He stated that he was not the prime mover in the Business but left the day to day preparation and running of the Business to the 1st named Defendant. In relation to the Investment in the Business 65.He confirmed that they had four partners in this business. The 1st named Defendant, himself, Mr. Chu and Mr. Chan. Mr. Chan and Mr. Chu invested $40,000 together. At the outset he invested $60,000. Subsequently he purchased 10 computer paying for them by credit card. When Pacific Satellite chased them for payment after they reneged on the agreement with them, he and the 1st named Defendant each paid $10,000 to them, totaling $20,000 in settlement. Credibility 66.The finding of credibility of the witnesses is important to the finding of facts related to the issues in this case. Credibility of the Plaintiffs 67.One piece of evidence, which suggested that the Plaintiffs did not tell the whole truth related to the amount of rental, which they charged the Defendants. In their evidence they stated that they asked for $9,500 per month but the Defendants asked for a reduction. In the end they reduced the rent by $300 to $9,200. Ms. Lui and the 1st and 2nd named Defendants stated that the Plaintiffs asked for $9,000 but when they learnt that the Defendants wanted to use the Premises for commercial use, they immediately asked for $9,200. This suggests that the Plaintiffs was not entirely truthful and did not disclose the whole truth. Credibility of the 1st named Defendant 68.The behaviour of the 1st and 2nd named Defendants upon discovery of the alleged alteration of the unilateral correction of Clause 8 by the deletion of the words “internet game centre” by correction ink and the adding of a triangle in the space is very strange. There had been no mention in the Defendants’ witness statements that they did anything when they allegedly discovered that. Under cross-examination when it was put to the 1st named Defendant that on the 18th November when he discovered the deletion of the words “internet game centre” at Clause 8 of the Tenancy Agreement he did not complain. He then replied and stated for the first time that he telephoned the 1st named Plaintiff to complain. If he did complain it would seem to have been a serious slip that he did not mention that either in his witness statement or in his evidence-in-chief. He was re-examined on this by his Counsel. He was asked, “the Plaintiffs’ Counsel said he had not immediately notified the Plaintiffs, you said you telephoned him…” He replied with in this way, “Telephoned him…give me sometime…I asked him about the triangle in clause 8 and the electricity. He said he will help me with the electricity and talk to the Incorporated Owners”. Before the 1stnamed Defendant could give his answer aforesaid, he paused for quite some time. He was then asked, “In relation to the triangle what did he say?” He replied, “He did not mention it. He ignored the matter.” It seems to me that his evidence that he asked the 1st named Plaintiff about this is not credible. 69.He was cross-examined as regards why there was no counter-signature against the addition of the words “internet game centre” in Clause 8 of the Tenancy Agreement before these words were deleted. He stated that it was because it was the insertion in a blank space that was why it was not countersigned. When he was asked why there was no counter-signature against the correction with white ink over the number of the keys that was handed over to the Defendants in Clause 9 of the Tenancy Agreement. He said that it must have been corrected after the execution of the Tenancy Agreement. He said that he was not clear as to when it was corrected. Most probably it was done in his absence. Previous to that he had said that the only place where there was a correction after the execution of the Tenancy Agreement was at Clause 8. 70.The 1st named Defendant stated that he heard orally from the Management Office on 1st December that the Premises could not be used for business purposes. He also received a page of the DMC from the Management Office in early December which stated the use of the Premises was stipulated to be for residential use. He did nothing about it until 14th December when he allegedly telephoned the 1st named Plaintiff. In his witness statement he stated that he telephoned Ms. Lui to arrange to meet the Plaintiffs. At the meeting the Plaintiffs confirmed that the Premises could be used for commercial purposes. In his evidence-in-chief after the evidence of Ms. Lui, who gave evidence that he received no complaints from the Defendants related to the Premises and the Defendants did not ask her to arrange with Mr. Chan to meet the Plaintiffs, the 1st named Defendant stated in evidence-in-chief that he telephoned Mr. Chan to arrange a meeting with the Plaintiffs. Upon cross-examination when it was put to him that he changed his evidence from the version in his witness statement when he said that he telephoned Ms. Lui to arrange a meeting with the Plaintiffs because he had heard the evidence of Ms. Lui that he did not make such an arrangement through her, he stated that he telephoned Ms. Lui but as she was engaged, to save time he contacted Mr. Chan direct. 71.He stated in examination-in-chief that about 18 December 2002 the Management Office gave him a page of the DMC to show that user of the Premises in the Building from 1st floor up could only be used for residential use. Under cross-examination he stated that it was in early December when they gave him that. When cross-examined on the fact that in early December, he already had the page of the DMC which stated that the user of the Premises was for residential use only, he then back-tracked and said that the Management Company just left the page but did not explain it. This is inconsistent from what he said in examination-in-chief that the page given to him from the DMC was to show that the user of the Premises in the Building from 1st floor up could only be used for residential purposes. 72.Despite having heard so clearly about the permitted user of the Premises in early December from the Management Office, he decided to prepare the Premises for the opening of his business. He commenced his business on 24th December before a written reply from the Incorporated Owners Management as regards whether he could apply to the China Light & Power for increased electrical capacity to the Premises. He said he believed in the assurances of the Plaintiffs related to the permitted user of the Premises. This clearly is unreasonable because by early December he had received a page of the DMC from the Management Office which stated the permitted user of the Premises for residential use and he had discovered the alleged unilateral deletion of the words “internet game centre” from Clause 8 by the Plaintiffs. 73.On 1 January 2002, he had a written reply from the Incorporated Owners stating that the Premises could not be used for commercial use and could only be used for business use. Despite the aforesaid notifications of user by the Management Office, in early December and again on 18th December aforesaid the Defendants continued purchases of computers with monitors, namely five Compaq computers and parts were purchased on 19th and 20th December 2002. Apart from that all computer games were purchased on 7th, 9th, 13th, 15th, 18th, and 22nd December 2002 with some purchased on 19th and 31st January 2003. Those purchased in January were done after written notification from the Incorporated Owners that the Premises could not be used for Commercial purposes. 74.This displayed a disregard of clear oral warnings from the Management Office with the support of a page of the DMC stating the permitted user for residential use only. He also commenced business on 24 December 2002. 75.When the 1st named Defendant was cross-examined on the Counterclaim, it became evident that part of the investment into the business was by two other partners and this claim was not filed on behalf of the other two partners Mr. Chan and Mr. Chu. When this became evident as an issue, the 1st named Defendant was cross-examined on how he became entitled to claim the items of purchases by Mr. Chan and Mr. Chu. He stated in paragraph 8 of his affirmation at page 173 of BD-1 that Chan Kok Ho had resigned from the Business on or about early January 2003 due to disagreement on internal management and operation of the Business. He stated that since then, the 2nd named Defendant and he were unable to contact Mr. Chan. In his evidence-in-chief, he stated that in relation to 5 computers, they were not worth much. Each of the other investors took a computer in reimbursement for their investment. Under cross-examination, he was asked how much Mr. Chan and Mr. Chu invested into the Business. He said for the first time that he has paid off all his partners. This would include Chan who the 1st named Defendant said he had lost contact with since early January before he terminated his business. 76.The 1st named Defendant stated upon cross-examination on paragraph 27 of his Witness State at page 82 of BD-1, he confirmed his statement therein that he had no knowledge of the damage done to the Premises and the drawing on the walls of the Premises etc. He alleged that it was the workmen who did this. He stated that it was dark when he went back to the Premises. He stated that he could not see the walls when he only went back to pick up things which were all put at the entrance. However he also said that he went back repeatedly to remove items. Some of the items left behind that had to be picked up after 26 January 2002 were big items. It seems to me highly unlikely that he did not know of the damage or the painting on the walls and his evidence is not credible. 77.The aforesaid shows that the evidence of the 1st named Defendant was a reliable witness and was not entirely truthful. Credibility of the 2nd named Defendant 78.He adduced his witness statement into evidence and confirmed that he knew its contents when he signed it and he confirmed the contents to be true. When the 2nd named Defendant gave evidence, I found that the contents of his oral evidence was straightforward. He was not seriously challenged in cross-examination. I formed the view that he was an honest witness. He stated in oral evidence-in-chief that Mr. Chan did not fill in the blank space in Clause 8 of the Tenancy Agreement. At the request of the 1st named Defendant, Mr. Chan wrote “internet game centre” in the blank space. Credibility of Ms. Lui 79.She was summonsed by subpoena by the Defendant to attend Court to give evidence. She is an independent witness. Her conduct as an Estate Agent was not questioned by the Estate Agents’ Authority. She gave a Statement to the Estate Agents’ Authority. Certain parts of her Statement were put to her, she did not wholly endorse all of the parts of the Statement put to her. However she stated that at the time she signed the Statement she confirmed its contents to be true. It seems to me that once she knew of this litigation she held back somewhat from the full contents of her Statement. In assessing her evidence I note the fact that she was not wholly attentive in the process of the drafting and execution of the Tenancy Agreement. She also had interruptions. She said that she was not sure she heard everything spoken. I find that the contents of the Statement she gave to the Estate Agents Authority to be truthful and she confirmed it to be true and adopted it as part of her evidence in these proceedings. I place full reliance on that. Whether Clause 8 had been unilaterally altered 80.This is an issue of credibility. As it hinges on credibility and affects the whole issue of the credibility of the evidence of the Parties, I shall deal with this at this point. The issue of whether the words “internet game centre” had been unilaterally deleted from Clause 8 of the Tenancy Agreement is the basis of the Defendants’ case for breach of Tenancy Agreement by the Plaintiffs as pleaded in paragraphs 8 and 9 of the Counterclaim. The onus of proof of this rests on the Defendants. There is evidence which support the Defendants’ contention and there is evidence which renders the Defendants’ allegation difficult to believe. I have to weigh the evidence in its entirety to come to my finding on this issue. I set out the evidence hereunder:-
81.Upon weighing the evidence, I come to the finding that the evidence that supports the Defendants’ contention that the Plaintiffs had unilaterally deleted the words “internet game centre” in Clause 8 to be very strong. On the other hand, it is true that the evidence of the 1st named Defendant’s reaction and subsequent behaviour upon the alleged discovery of the alleged unilateral alteration of Clause 8 is not that which would be expected of a normal reasonable person. When assessing the 1st named Defendant’s behaviour the Court has to consider such behaviour from the perspective of young men who have not had any experience of business prior to this. It seemed that the 1st named Defendant was wanting to go ahead with the formation of the Business to the extent that he was quite reckless. Also, the Defendants have both got full time jobs and the Business was run after their working hours. It seemed that the 2nd named Defendant had not entered into the day to day preparation for the opening of the Business and may not have been involved in all this having left it to the 1st named Defendant. Having weighed the evidence which I set out in the paragraphs aforesaid, I find that the evidence weighs stronger in support of the Defendants’ contention than otherwise, despite having carefully considered the fact that the allegation against the Plaintiffs is a serious allegation and cogent evidence is required to support it. Although I had come to the finding that the 1st named Defendant’s evidence is not wholly credible, yet the evidence on which I base my finding is circumstantial evidence and the evidence of Ms. Lui. I also found the evidence of the 2nd named Defendant supported the 1st named Defendant’s on this and I formed the view that his evidence was reliable. On the basis of the evidence set out in the earlier paragraph, I find that the Plaintiffs had unilaterally altered Clause 8 by deleting the words “internet game centre” from the said Clause by white correcting ink when the Defendants were not present on a date after the date of the execution of the Tenancy Agreement. The 1st Issue 82.It is not easy to reconcile the various strands of evidence. Ms. Lui stated that the Plaintiffs asked for a rent of $9,000 per month but when they heard that the Defendants wanted to rent the Premises for business use, they increased the rent by $200. The Plaintiffs clearly had let the Premises knowingly for business use. Not only that, they were wanting a higher rent on the basis that the business use of the Premises. 83.The Defendants rely on the evidence of Ms. Lui and her statement given to the Estate Agent Authority in support of their case in this issue. Ms. Lui stated in examination-in-chief that at the time she signed her statement, she confirmed it to be true. She stated that at the time when she gave that statement she did not know of the complaint filed in relation to this case. She only knew that she was not the subject of the complaint. She stated that she only heard from the Defendants that they could not obtain permission to increase the electricity supply to the Premises. When giving oral evidence she stated that there was no objection by the Plaintiffs to the proposed use, nor was there any guarantee by the Plaintiffs in relation to the proposed use. She stated that no mention was made about what is an internet game centre or what it would be like when it was used as an internet game centre. However clearly in the contents of her Statement to the Estate Agent Authority she stated that the Landlord’s wife said that the former tenant had used the Premises for commercial purposes and she felt that it would not be a problem to use the Premises for commercial purposes. Again in her statement at page 372 of the BD she said that when the 1st named Defendant said that they wanted to use the Premises as an internet game centre the Landlord had said “yes”. The Landlord said that the previous tenant had used it for commercial use. The statement was confirmed by her to be correct when she signed it. It seems to me that the contents of the statement is reliable as she was not aware of these proceedings when she prepared it. 84.If the 1st named Plaintiff said “yes” in reply to the 1st named Defendant’s that the Defendants wanted to use the Premises as an internet game centre as to whether that the Premises could be used as an internet game centre and further said that the previous tenant had used it for commercial use, and the 2nd named Plaintiff had said words to that effect, it is highly unlikely that they would have said that they do not guarantee that the Premises could be used as an internet game centre. This would contradict what they had said earlier. Further if they stated openly before the signing of the Tenancy Agreement that they did not guarantee the use of the Premises as an internet game centre and would not be responsible were the Defendants stopped from such use by the Incorporated Owners, it would not be reasonable for any perspective tenants who rented the Premises for such use to want to rent the Premises. Had the Plaintiffs stated this, it is unusual that they would not have asked Mr. Chan to write that in the Tenancy Agreement. 85.Mr. Chan had inserted the words “internet game centre” in the space related to user in Clause 8. Mr. Chan, being the Estate Agent acting for the Plaintiffs must have been under the impression that it was the agreement between the parties that the Premises was to be used for that purpose. The flow of conversation between the parties must have led him to form such an impression. If the Plaintiffs had stated that they did not guarantee such use before he inserted the words “internet game centre” into the space for user in Clause 8, he would certainly have been alerted to that fact and would not have inserted those words into Clause 8. 86.As referred to earlier, Ms Lui stated that the atmosphere after the signing of the Tenancy Agreement was harmonious. If the Plaintiffs had stated that the Premises could be used as an internet game centre, as stated in the evidence of Ms. Lui, and at the time of signing of the Tenancy Agreement, the Plaintiffs had required the words “internet game centre” to be deleted from Clause 8, the atmosphere between the parties could not have been harmonious. 87.Having considered the aforesaid and the evidence of the 2nd named Defendant whom I found to be a straightforward witness. I find on the balance of probability that the Plaintiffs have made the misrepresentations as alleged by the Defendants. I find the 1st Issue against the Plaintiffs. The 2nd Issue 88.Having found that the Plaintiffs had unilaterally amend Clause 8 of the Tenancy Agreement by deleting the words “internet game centre” therein, the pleaded case of the Defendants of breach of contract based on the deletion of these words from the Tenancy Agreement has been established. The 3rd Issue 89.The Plaintiffs’ Counsel submits that the conduct of the Defendants after having notice of the misrepresentation and breach of Tenancy Agreement by unilateral alteration of Clause 8 of the Tenancy Agreement had failed to take action and their conduct gives rise to an affirmation of the Tenancy Agreement thereby waiving their rights to rely on the wrongful acts to counterclaim or to defend the Plaintiff’s claim. He relies on paragraph 6-121 of Chitty on Contracts Vol. 1 at page 491- 492 to support his contention. 90.The Defendants in this case had oral notice from the Management Office of the permitted user of the Premises in early December. They had a page of the DMC stating user in early December. They continued to prepare for the opening of their business stating that they relied on the representations of the Plaintiffs. They opened business on the 24 December 2003. They had written notice from the Management Company about the user of the Premises on 2 January 2003. They did not rescind the Tenancy Agreement by any action or written notice. It was in late January when they gave notice they would surrender the Tenancy Agreement but the keys were not delivered to their own solicitors until 26 March 2003. 91.The 1st named Defendant stated that he did not know he had the right of rescission of the Tenancy Agreement. I accept that. The Defendants are young people and this is their first business venture. The Defendants stated that they protested through non-payment of rent. 92.It seems that the Plaintiffs have not changed their position in reliance on the absence of any protest. They have acted as they could by filing a claim in the Lands Tribunal for rent in arrears and possession of the Premises. No third party has been affected by this non action of the Defendants. I am of the view that the facts and circumstances do not amount to an affirmation of the Tenancy Agreement. The Counterclaim 93.The first item of the Counterclaim is for a Declaration that the Tenancy Agreement was void ab initio or alternatively breached by the Plaintiff. As the Defendants had conceded that they had delayed in the surrender of the Premises to the Plaintiff for a period of two months, and had also used the Premises and also conceded to damages for reinstatement expenses to the Plaintiffs, the Defendants could not at the same time seek a Declaration that the Tenancy Agreement was void ab initio. I had also found upon the application of the Defendants that the Plaintiffs had breached the Tenancy Agreement by the unilateral deletion of the words “internet game centre” from Clause 8 thereof. I refuse the application for a Declaration that the Tenancy Agreement was void ab initio. I find however, that the Defendants are entitled to damages for misrepresentation as pleaded in the Defence and for breach of Tenancy Agreement. Assessment of Damages 94.In relation to quantum of damages, I assess it hereunder. 95.In my view, the Defendants ought to have taken notice of the warning of the Management Office by oral notice on 1st December of the permitted user of the Premises. Particularly when this was supported and reinforced by a page of the DMC in early December. This is in early December 2003. They should not have expended further on investments into the business. They could have obtained advice on the page of the DMC or approached the Incorporated Owners for written confirmation. 96.In view of the aforesaid, the amounts of their counterclaim would be limited to those items which were necessarily expended in early December 2003 and those supported by clear documentation which showed contracts entered into on or before 1stDecember. There is no documentation that the Orders of the 14 computers were placed on or before 1 December 2003 except the one purchased by the 1st named Defendant. 97.The items of counterclaim that I would allow would be as follows:-
The Plaintiffs’ Claim 98.I grant the Plaintiffs’ claim which is stated hereunder. 99.There is no dispute that the Defendants have failed to pay rent and mesne profits from 21st December to date of delivery up of Premises. The Plaintiffs were notified to collect the keys from the Defendants’ Solicitors on 26 March 2003. The Plaintiffs collected the keys on the 1 April 2003. I give the Plaintiffs two days to pick up the keys. The rent in arrears amounts to 3 months 8 days at $9,200 per month. This comes to $30,053.33. The reinstatement expense in the sum of $55,000 is conceded. The amount of the gas bill in the sum of $650 could not be proved. In relation to electricity charges of $1,717, the Defendants had paid a deposit in the sum of $1,600. The deposit has to be deducted from the electricity bill leaving a balance of $117. To the arrears of rental, I add the sums of $117 and $55,000. These sums total $85,170.33. I therefore give judgment to the Plaintiffs for their claim. 100.Judgment be entered for the Plaintiffs against the Defendants in the sum of $85,170.33 together with interest thereon from 6 January 2003 to date of judgment at judgment rate and thereafter until payment at judgment rate. Judgment be entered for the Defendants against the Plaintiffs on the Counterclaim in the sum of $181,181.71 together with interest thereon at judgment rate from date of the Counterclaim to date of judgment and thereafter until payment at judgment rate. I grant an order nisi for costs of the Claim to be paid by the Defendants to the Plaintiffs to be taxed if not agreed and an order nisi for costs of the Counterclaim to be paid by the Plaintiffs to the Defendants to be taxed if not agreed. I order that one judgment and costs be set off against the other and that execution do issue for the balance only. The Defendants’ own costs be taxed in accordance with the Legal Aid Regulations.
Representation: Mr. David Chan instructed by Messrs. Ng & Partners for the Plaintiffs. Mr. Anthony P.W. Cheung instructed by Messrs. Norman M.K. Yeung & Co. assigned by D.L.A. for the Defendants. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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