Manico Industrial Ltd v. Newstyle Trading Ltd
Read the full judgment text of LDPE 578/2005 on BabelCite. This LDPE judgment was delivered on 13 December 2005.
1. The Applicant is the landlord and the Respondent the tenant of the premises known as Ground Floor, Shop No. 69, Peninsula Centre, 67 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong (“the Premises”). The Applicant has let the Premises to the Respondent since about 1995. The latest Tenancy Agreement dated 5 May 2003 made between the parties was for a term of 2 years commencing from 15 April 2003 and expiring on 14 April 2005 at a monthly rent of $15,000, with a rider, by way of Clause (17)
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LDPE 578/2005 IN THE LANDS TRIBUNAL OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION LDPE Application No. 578 of 2005 _______________________ Between
_______________________ Coram: Member W. K. LO Date of hearing: 8 July 2005, 19 August 2005 & 28 October 2005 Date of last submission: 7 November 2005 Date of judgment: 13 December 2005
Background 1.The Applicant is the landlord and the Respondent the tenant of the premises known as Ground Floor, Shop No. 69, Peninsula Centre, 67 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong (“the Premises”). The Applicant has let the Premises to the Respondent since about 1995. The latest Tenancy Agreement dated 5 May 2003 made between the parties was for a term of 2 years commencing from 15 April 2003 and expiring on 14 April 2005 at a monthly rent of $15,000, with a rider, by way of Clause (17) that the monthly rent be fixed at $14,000 for the period from 15 April 2003 to 14 October 2003 and then the monthly rent be fixed at $15,000 for the remaining period of the 2-year tenancy. According to the Applicant, the parties had orally agreed to a tenancy for 2 years at a monthly rent of $18,000. However, because of the SARS crisis, the Applicant agreed to vary the terms of the tenancy and reduced the same into writing. This explains why the said tenancy agreement was dated after the commencement date of the tenancy. 2.The previous tenancy was due to expire on 14 April 2005 by effluxion of time. Clause (6) of the said tenancy agreement (a copy of which was produced and marked as Exhibit A1) provided that the Respondent shall pay property tax, Government rates and rent, management fees and all other outgoings. Clause (13) did not specifically state the provision of air-conditioners by the Applicant whilst Clause (14) provided for the charging of a late payment penalty/interest charge of $500 per month if the monthly rent payable was overdue by 10 days or more. Both clauses were added at the end in an otherwise pro-forma agreement commonly sold in local book stores. It was the evidence of the parties that these clauses were hand-written by Madam Chan, the first witness of the Applicant. The Applicant’s Application 3.The parties did not manage to resolve the dispute. On 7 June 2005, the Applicant filed an application in the Lands Tribunal seeking possession of the Premises on the ground that the tenancy expired but the Respondent remained in possession after the expiry of the one month’s notice to quit served by the Applicant to the Respondent requiring the latter to deliver up vacant possession of the Premises on 8 June 2005. The Applicant was initially not legally represented. After the first hearing on 8 July 2005, the Applicant chose to be represented and then subsequently, amended the application on 22 August 2005 by leave of the Tribunal. The amended application sought the following orders: -
The Respondent’s Notice of Opposition 4.The Respondent filed a notice of opposition on 13 June 2005 in which the Respondent claimed that the parties had entered into a tenancy agreement in or about mid to end of March 2005 which tenancy was for a new term of 2 years commencing from 15 April 2005 at the monthly rent of $18,000 per month. The Respondent alleged that after the parties had duly signed the said tenancy agreement in duplicate, the Applicant took away both copies purporting to have them stamped under the Stamp Ordinance. But the Applicant refused to return any of the two signed copies to the Respondent despite repeated requests from the Respondent. As a result of this, the Respondent sought the following: -
The issue of the case 5.The main issue of the case lies with the factual dispute as to whether there was any new oral tenancy agreement or/and any new written tenancy agreement signed by the parties on or around 21 March 2005 as alleged by the Respondent, supported mainly by the oral testimony of the Respondent’s two witnesses and their written statements. This was however totally refuted by the Applicant, again supported by the written statements and the oral evidence of the Applicant’s two witnesses. So, it is a case of deciding which side’s evidence should be accepted. 6.The counsel for the Respondent cited the case of Yu Ming Investment Limited v Richard Peng [2005] HKCFI 240 (unreported)and submitted that the standard adopted by Justice Chung in paragraph 4 of the written judgment should be similarly applied in this case: -
(a) whether that part of his testimony is inherently plausible or implausible; (b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).
7.The Respondent submitted that “as a matter of evidence, he who asserts must prove”. Therefore, in this case, it must be the Respondent who bears the burden of proof that the parties had a new oral tenancy, which was also subsequently effected in writing. The witnesses called by the parties 8.Although the parties were limited companies, the Applicant was owned and controlled by its director, Madam Chan Tik Ngar Isador (“Madam Chan”) whilst the Respondent was owned and controlled by an elder sister of Madam Wong Lai To Sara (“Madam Wong”), who was also the Respondent’s first witness. Although Madam Wong said that she was only an employee of the Respondent, it was clear from her evidence and the evidence of Madam Chan that she was the “de facto” responsible person of the Responsible and could decide whether to renew the tenancy of the Premises, as well as the terms of the renewal. Madam Chan and Madam Wong knew each other for many years. 9.The Applicant also called for the evidence of Ms. Ng Tsz Wai who was the daughter of Madam Chan. Her evidence was that at the end of April 2005, she accompanied her mother to the Premises bringing the draft tenancy agreement in duplicate (Exhibit A2) for consideration by Madam Wong. Otherwise, she was not much involved with the negotiation and contact with Madam Wong. 10.The Respondent also called for the evidence of Ms. Lam Yuk Fung, an employee of the Respondent working as a salesperson in the store. Her evidence would not carry much weight because she was not an active participant of the negotiation. The Applicant’s case 11.It was the Applicant’s case that the parties started negotiating for renewal from early March 2005. Both parties agreed to renew for 2 years. There was no dispute of the intention to renew by both parties. The only main dispute was on the amount of rent under the new tenancy. Madam Chan started offering a rent of $23,000 but Madam Wong counter-offered a rent of $18,000. This was not accepted by Madam Chan who however still agreed to reduce her asking rent to $21,600. 12.Madam Chan gave evidence that she went to the Premises twice. In early April 2005, she brought along draft tenancy agreement with a view to have that signed by herself and Madam Wong. When she was in the Premises, she already noticed that the new air-conditioner had been installed. So, she agreed to add an air-conditioning clause because she refused to bear the costs of the new air-conditioner, as suggested by Madam Wong. She actually reminded Madam Wong that in the previous tenancy agreement signed in 2003, it was clearly stated that she did not provide air-conditioner to the Premises. Although she could not reach an agreement with Madam Wong, she left behind the set of draft tenancy agreement, which was the same as the document produced by Madam Wong and marked as Exhibit R1. Before the end of April 2005, she went to the Premises again, this time accompanied by her daughter, Ms. Ng Tsz Wai. She brought along another set of draft tenancy agreement and hoped to persuade Madam Wong to sign in order to complete the renewal process. Unfortunately, she failed to accomplish her task as a result of which she took away this set of document before she left. This was produced by her and marked as Exhibit A2. After the end of April 2005, she did not go the Premises. 13.Madam Chan said that since the previous tenancy had expired on 15 April 2005 but there was still no agreement on renewal, she instructed Messrs. Tam & Partners to write a letter to the Respondent on 9 May 2005, giving the latter one month’s notice (under the prevailing provisions of the Landlord & Tenant (Consolidation) Ordinance regarding the termination of business tenancy) to terminate the previous tenancy agreement which expired on 14 April 2005 and offering, subject to contract basis a new tenancy for 2 years commencing from the date of expiry of the previous tenancy at a monthly rent of $21,600 per month together with the adjustment of the rental deposit. The Respondent did not dispute the receipt of this letter. 14.Madam Chan said that she then also had noticed the deposit of a sum of $18,000 into her account, which was also stated in the letter dated 17 May 2005 from the Respondent’s lawyer. She instructed her lawyer to write to the Respondent on 18 May 2005 replying that “the depositing of the money into our client’s bank account as stated in your said letter was a unilateral act of your client which does not amount to conclusion of any tenancy agreement”. The Respondent’s case 15.The Respondent’s case of the events that took place during the months of March and April 2005 was quite different from that of the Applicant. Madam Wong said that Madam Chan had come to the Premises three times concerning the renewal of tenancy whilst it was Madam Chan’s evidence that she had gone there only twice. 16.Madam Wong said that prior to the notice of termination given by the Applicant, the parties had already reached an oral agreement in March 2005 and then on or around 21 March 2005, both Madam Chan and herself, on behalf of the parties, signed a written renewal agreement for the the Premises. That was for a term of 2 years commencing immediately after the expiry of the previous tenancy, i.e., from 15 April 2005 at a rent of $18,000 per month. They also discussed during the meeting about the replacement of the old air-conditioner. At the end, they agreed on the addition of an air-conditioning clause stating that the tenant could remove the new air-conditioner when leaving the Premises at the end of the new tenancy. However, Madam Wong did not see it necessary to take a photocopy of the signed new agreement before that was taken away by Madam Chan for stamping on behalf of both parties, notwithstanding that Madam Wong did not dispute that there was a shop with photo-copying service on the basement floor of Peninsula Centre where the Premises was situated. 17.Madam Wong asked her colleague Ms. Lam Yuk Fung to arrange the replacement of the air-conditioner. This was effected on 6 April 2005 at a cost of $9,000. She produced a receipt to support this purchase and installation. Madam Wong said that without the signed tenancy agreement on or around 21 March 2005, she would not have spent this sum of money towards the end of the existing tenancy. 18.Madam Wong said that on 19 April 2005, she telephoned Madam Chan, enquiring about the process of stamping. It was at this stage that Madam Chan complained about the amount of rental increase to $18,000 reached earlier as being too modest, compared with the then prevailing market rent. But Madam Chan still promised to return the signed new tenancy agreement to the Respondent after stamping. On the next day, Madam Wong, acting on the terms of the signed new tenancy agreement, paid into Madam Chan’s account the new rent of $18,000 for the period from 15 April 2005 to 14 May 2005. 19.Madam Wong added that a few days later, Madam Chan came to the Premises with her daughter proposing a new rent of $21,600. She was enraged and threatened to sue Madam Chan for reneging the above said signed new tenancy agreement. However, Madam Chan when leaving still said that she would give Madam Wong a few days to think about the new proposal. 20.Madam Wong further added that Madam Chan then came alone the third time another few days later bringing with her another set of draft documents produced and marked by Madam Wong as Exhibit R1. Madam Chan still refused to return the set of agreement signed around 21 March 2005 but asked Madam Wong to consider signing the documents at Exhibit R1. 21.Madam Wong said that another few days later, Madam Chan phoned her asking her whether she would agree to pay the new rent of $21,800. Otherwise, Madam Chan threatened to sue for possession of the Premises. Madam Wong did not bother to answer her but reminded Madam Chan not to renege on her previous signed agreement. 22.Madam Wong, when cross-examined by counsel for the Applicant, answered that she still had not thought about writing to Madam Chan after it transpired to her for quite sometime that Madam Chan had decided to renege on the previously signed agreement. 23.Nevertheless, upon receiving the letter dated 9 May 2005 from Messr. Tam & Partners for the Applicant, the Respondent finally saw it necessary to instruct her lawyer Messrs. C.L. Chow & Macksion Chan to write back on 17 May 2005 refuting what was stated in the said letter of 9 May 2005. Evidence of the witnesses 24.The Respondent concluded in the final submission that applying the tests as set out by Justice Chung in the case of Yu Ming Investment Limited v Richard Peng [2005] HKCFI 240 (unreported),the evidence of the Applicant’s first witness, Madam Chan should not be relied upon at all. On the contrary, the Respondent submitted that the evidence of Madam Wong and Ms. Lam did not have serious discrepancies. 25.The Respondent argued in very minute details that there were serious discrepancies in the evidence of Madam Chan. However, I do not agree to the submissions. Firstly, the Respondent submitted that what was stated in the witness statement (that Madam Chan went to the Premises to discuss about the renewal of tenancy) was not mentioned in the Amended Particulars of Claim. I do not see how the Respondent could reach such a conclusion that this was a serious discrepancy. It is not unusual that a witness gives more details in his witness statement than what a party states in the Particulars of Claim. I would say that normally it would be most unusual if the pleadings are exactly the same as the statements. And that is also the case when one compares the Particulars in the Notice of Opposition with the witness statement of the Respondent’s first witness (Madam Wong). 26.The Respondent stressed that Madam Chan should not be believed because when giving evidence, she had mixed up the copies of tenancy agreements that she took to the Premises with a view to enter into negotiation and conclude the renewal deal with Madam Wong. She also said that since in March, she had not reached agreement with Madam Wong through telephone conversation, she did not find it necessary to go to the Premises. This contradicts with her other evidence that on different occasions, in April, she went to the Premises with draft tenancy agreements. I do not find these evidence to be conflicting with each other. The original agreement would expire on 15 April 2005, so I could draw inference that any landlord would be prepared to do more, which includes going to the Premises, nearer or after the original expiry date of tenancy. It is true that Madam Chan confused the copies of agreements produced and marked as Exhibit A2 and R1 which she took to the Premises on different occasions. But I find the confusion to be quite possible taking into account that the parties had been negotiating for some time. Also, Madam Chan was frank in answering the Tribunal that she was confused by the various questions posed by the Respondent’s counsel. She however did clarify on re-examination that she brought along Exhibit R1 in early April 2005 and then Exhibit A2 in late April 2005. 27.The Respondent questioned in the final submission why Madam Chan had added in the draft tenancy agreement of Exhibit R1 the air-conditioning clause but not in the draft tenancy agreement of Exhibit A2. The Respondent also questioned why Madam Chan had added in the draft tenancy agreement of Exhibit A2 the interest clause while saying that the air-conditioning clause would be added later. I note that as the same interest clause existed in the previous tenancy agreement signed in 2003, it must be the intention of the Respondent that this must be added in any new tenancy agreement. 28.The Respondent queried in the final submission that why it could be possible for the parties in this case to have agreed on such additional terms as the interest clause and the air-conditioning clause before they could agree on the amount of rent upon renewal. For this reason, the Respondent submitted that the evidence of Madam Chan had very serious inconsistency. This is something I cannot agree. Generally speaking, I would find that it is not uncommon for a landlord and a tenant agreeing on all the basic terms of a new tenancy but not the rent. 29.As to the evidence of Madam Wong, I am not convinced by her explanation that firstly, she did not find it necessary to make a photo-copy of the signed tenancy agreement before the same would be taken away for stamping by Madam Chan on or around 21 March 2005 after signing by both parties. The Respondent submitted that this was very reasonable since the ladies knew each other for over 10 years and that Madam Chan had never reneged before. However, bearing in mind the experience of Madam Wong as a business woman, the history of negotiation at the time of renewals in the past (which could last for months in the past, according to Madam Chan), the recent history of negotiation in March 2005, the common knowledge that the property market rent was rising quite rapidly in early 2005 and that the signed agreement was a business contract without which it would be difficult to prove later on whether there was any agreement, as well as the readily available photocopying service nearby, I do not accept this submission. On the contrary, I think it was implausible that any one in the position of Madam Wong would choose not to make a photocopy of the signed new tenancy agreement if indeed such an agreement had ever been reached. 30.Also, it was hard to believe that why in March 2005, it only took such a short time for Madam Chan and Madam Wong to have agreed to a new oral tenancy on the first occasion during a telephone conversation, which only lasted for about 20 odd minutes, according to the evidence of Madam Wong, bearing in mind the history of previous negotiation for renewals as described by Madam Chan and Madam Wong. 31.In addition, I find it hard to believe that according to Madam Wong, she entrusted Madam Chan to take away, on or around 15 March 2005, both copies of the newly signed tenancy agreement for stamping and Madam Chan did not bring it back over a month’s time, but she still did not find it necessary to chase seriously the matter. Madam Wong actually only instructed the lawyer to write to the Applicant on 17 May 2005 (over 2 months after the purported signing of the said agreement) and that was only in response to the letter from the lawyer for the Applicant on 9 May 2005. This is highly unlikely the behavior of a normal business person, not to say an experienced one such as Madam Wong. 32.Indeed, it was also implausible that the Responsible chose never to put anything in writing before 17 May 2005. Not so when the parties had reached an oral agreement before signing the said new tenancy agreement on or around 21 March 2005. And again, after signing the said agreement, the Responsible still did not find it necessary to put on record in writing, not even after Madam Wong by then realized that Madam Chan might choose to renege on the signed agreement a few days later after 19 April 2005 (according to the evidence of Madam Wong) when Madam Chan already began proposing some new terms to the Respondent. This was quite implausible. 33.I also agree with the submission from the Applicant that the answers given by Madam Chan regarding the assessment of the market rent for the Premises to be not reasonable. Madam Chan said that she had not done any enquiry regarding the level of market rent but could decide on the maximum limit of the rent that the Responsible could afford to pay. But she should fully realize that in a negotiation, the landlord would definitely need to refer to the market level before agreeing on the rent and therefore, it paid to find out the level of rent before embarking on the negotiation. Furthermore, Madam Chan also admitted that after paying a rent of $18,000, there would still be a profit margin of some thousand dollars. 34.Madam Chan did not think it necessary to pay for the increase in deposit after signing the said new agreement in March 2005. She claimed that the parties used to make such adjustments after the agreements were stamped in the past. But payment of the increased deposit has nothing to do with the stamping. Also, Madam Wong said that Madam Chan had telephoned and reminded her to pay the new rent of $18,000. If so, I agree with the Applicant that it was inexplicable why Madam Wong had not reminded Madam Chan to pay the additional deposit of $6,000 and the management fees. 35.Therefore, on balance of probabilities, I do not believe in Madam Chan’s version of what happened from March 2005 because her above action or inaction was quite unreasonable. Doctrine of Part Performance 36.The Respondent submitted that as the Respondent had spent money on the removal of the old air-conditioner and the installation of the new air-conditioner costing $9,000. It would be unreasonable for an experienced business person such as Madam Wong to take such an action without knowing that there was a secured new tenancy of 2 years from 15 April 2005. It should be inferred from this that there was the existence of the newly signed agreement as alleged by Madam Wong. Therefore, the doctrine of part performance should operate in favor of the Respondent. 37.However, my finding is that under the previous tenancy agreement, it was clear that the provision of air-conditioner was never the responsibility of the Applicant. The version of what happened as described by Madam Chan could equally be plausible. She said that when she visited the Premises in early April 2005, the Respondent had already asked her to bear the cost of replacing the air-conditioner. She finally agreed to state in the proposed new tenancy agreement (Exhibit R1) a new air conditioning clause. With that clause, it could be inferred that the Respondent then decided to replace the air-conditioner (which has not been working properly for quite some time) because at that time, there was every intention from both parties that they would be renewing the tenancy. Doctrine of Proprietary Estoppel 38.The Respondent also sought to apply the doctrine of proprietary estoppel regarding the replacement of the air-conditioner. It was argued that as the Respondent had paid rent of $18,000 and spent the sum of $9,000 in replacing the air-conditioner, the Applicant would be estopped from denying the existence of the new tenancy. The Respondent, under an expectation created or encouraged by the Applicant, acted to her detriment as a result of which this Tribunal, should compel the Applciant to give effect to such an expectation. 39.However, as submitted by the Applicant, the payment into the Applicant’s account of $18,000 per month, with the first payment made on 20 April 2005, could be just a unilateral act of the Respondent. It was the evidence of Madam Chan that soon after she had checked her bank statement, she instructed her lawyer to write to remind the Respondent that the payment was merely treated as a unilateral act. As to the air-conditioner, what has been said in paragraph 37 also apply here. Tribunal’s Findings 40.To conclude, having regarding to all the evidence adduced in this case, including the evidence of the witnesses, the documentary evidence as well as the parties’ submission, I am of the view that, on balance of probabilities, the Respondent failed to discharge the onus of burden of proof that there was any oral agreement between the parties on the new tenancy for the Premises, or there was the said written tenancy agreement signed by the parties’ representatives, Madam Chan and Madam Wong respectively, for the new tenancy for the term of 2 years commencing from 15 April 2005. Also, the payments by the Respondent to the Applicant’s bank account in the same sum of $18,000 on 20 April 2005, 18 May 2005, 20 June 2005 and 12 August 2005 did not amount to part performance of any tenancy agreement between the parties, but were merely part payment for mesne profits for the Premises from 15 April 2005 onwards. Amount of mesne profits for the period from 15 April 2005 to the date of delivery up of vacant possession 41.The parties agreed before the case was adjourned on 28 October 2005 that they would state in their written final submissions if they would consent to the amount of monthly mesne profits should the Tribunal find it necessary to assess such mesne profits. In their submissions, the parties stated that they consented the mesne profits for the period from 15 April 2005 up to the date of recovery of vacant possession to be in the sum of $21,600 per month. I would therefore adopt this amount in the orders that I am going to make below. Outstanding sums of rent/mesne profits, etc. owed by the Respondent to the Applicant 42.The Respondent has been paying rent on the basis that a new tenancy agreement for a term of 2 years commencing from 15 April 2005 was duly signed. Other than the basic dispute as to the existence or otherwise of this new tenancy, the parties did not have any dispute on the actual amount of rent/mesne profits paid by the Respondent to the Applicant as all the payments were invariably paid to the Applicant’s designated bank account. The details are as follows: - Payment date Amount (HK$) Covering the period in 2005 1/3/2005 15,000 15 Feb – 14 Mar 1/4/2005 15,000 15 Mar – 14 Apr 20/4/2005 18,000 15 Apr – 14 May 18/5/2005 18,000 15 May – 14 Jun 20/6/2005 18,000 15 Jun – 14 Jul 12/8/2005 18,000 15 Jul – 14 Aug 43.The Respondent also did not dispute that she had not paid management fees and rates on time. In the final submission, the Applicant stated that the Respondent as of 7 November 2005 still failed to pay for (a) management fees for the November 2005 and (b) Government rates and rent for the quarter from 1 October 2005 to 31December 2005. 44.Under the previous undisputed tenancy agreement signed in 2003 for the tenancy which expired on 14 April 2005, there was an interest clause (No. 18) stating that in the event there was a delay for 10 days or more in paying the monthly rent, a late payment charge for interest and service in the sum of $500 per month would be due to the Applicant. The Applicant submitted that although the tenancy expired on 14 April 2005, this interest clause still applied as the Respondent chose to remain in possession notwithstanding the service by the Applicant of a valid one month’s notice to quit, which expired on 8 June 2005. Conclusion 45.Summing up, I accept the evidence of Madam Chan instead of Madam Wong. The original tenancy which expired on 15 April 2005 was also duly determined by the service of the valid notice to quit. Orders 46.I make the following orders: -
Costs 47.I agree that in this case, costs should follow the event. Therefore, I give a costs order nisi that the Respondent do pay the Applicants costs of the application, with certificate for counsel at District Court Scale, on party and party basis, to be taxed if not agreed. The costs order nisi shall become absolute if no application is made within 14 days to vary the order.
The Applicant, represented by Mr. Jimmie Ho, instructed by Messrs. Edward C. T. Wong & Co., Solicitors The Respondent, represented by Mr. Gary Chu, Counsel, instructed by Messrs. C. L. Chow & Macksion Chan, Solicitors |
Cases cited in this judgment