Chan Wing Nam v. Chan Kwok Ling and Others
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DCCJ 1588/2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1588 OF 2006 --------------------------------- BETWEEN
---------------------------------- Coram: Deputy District Judge R. Cheung in Court Date s of Hearing: 9th and 10th May 2007 Date of Handing down Judgment: 28th June 2007 ------------------- JUDGMENT ------------------- 1.The Plaintiff claims under a Tenancy Agreement for various sums payable by the Defendants thereunder. The main claim however is a claim for reimbursement of gas charges consumed at the rented premises for the period from June 2003 to 28 February 2005 in the sum of $528,808.00. The other claims are for relatively speaking much smaller amounts. The Defendants deny liability. Their case is that there was a mistake rendering the Tenancy Agreement dated 1 March 2005 unenforceable. 2.The case of the Defendants may be understood essentially as follows: They were co-owners of the premises known as Shops 3 and 4 on the Ground Floor of Pao Yip Building, Nos. 1-7 Ship Street, Hong Kong ("the Shop") at all material times. On 28 January 2003, the 1st Defendant entered into a Tenancy Agreement with the Plaintiff whereby the 1st Defendant let the Shop to the Plaintiff for business use for a term of three years commencing from 1 March 2003 and expiring on 28 February 2006 at the monthly rent of $56,000.00 ("the 1st Tenancy Agreement"). The 2nd and 3rd Defendants were not parties to the 1st Tenancy Agreement and they had not signed it. In March 2005, the Defendants decided to sell the Shop subject to the tenancy and they had to put things straight. The Defendants thus entered into the Tenancy Agreement dated 1 March 2005 ("the 2nd Tenancy Agreement") with the Plaintiff to make them all parties to the contract and to correct some errors in the 1st Tenancy Agreement (the errors are of no significance). The Defendants thought that the 1st Tenancy Agreement and the 2nd Tenancy Agreement both contained the same terms. In fact, they did not. Some provisions were different. One of the differences is that the 2nd Tenancy Agreement provided that the Defendants were to pay the gas charges (or rather coal charges) of the Shop. The Plaintiff's main claim is grounded precisely on this. Hence, the Defendants contended that there was an operative mistake which rendered the 2nd Tenancy Agreement "unenforceable". 3.The Plaintiff and the Defendants were legally represented at an earlier stage. At the trial, all appeared in person. Parol Evidence Rule 4.The parol evidence rule is that parol testimony cannot be received to contradict, vary, add to or subtract from the terms of a written contract or the terms on which the parties have deliberately agreed to record any part of their contract. 5.To the above general rule there are many exceptions. "Extrinsic evidence is admissible to show that what appears to be a valid and binding contract is in fact no contract at all. Thus evidence may be admitted to show that one or both parties contracted under a mistake" per Chitty on Contracts, 28th edition, Volume 1, para. 12-104. Mistake 6.Paragraph 4(7) of the Defence pleaded "common mistake". That does not in any way limit the case of the Defendants on the issue of mistake. At the outset of the trial, it was made clear that the broader issue of "mistake" is engaged irrespective of what the possibly narrower concept of "common mistake" may mean. Although the Defence pleaded that the 2nd Tenancy Agreement was unenforceable rather than void, I consider it open to me to find that it was void rather than merely unenforceable. 7.Paragraphs 5-032 to 5-053 of Chitty supra are about "Mistakes as to the Terms of the Contract". The learned authors of Chitty have the following to say at paragraph 5-032: "No contract can be formed if there is no correspondence between the offer and the acceptance. If therefore, one party makes to the other an offer which the other party accepts in a fundamentally different sense from that intended by the offeror, the contract may be void……". Further the learned authors of Chitty say at paragraph 5-034: "A mistake as to the terms of the contract, if known to the other party, may avoid the contract. In this case, the normal rule of objective interpretation is displaced in favour of admitting evidence of subjective intention". At Paragraph 5-035 the learned authors of Chitty further say: "It is not clear whether for the mistake to be operative it must actually be known to the other party, or whether it is enough that it ought to have been apparent to any reasonable man. In Canada the latter suffices……Mance J. said that the objective principle would be displaced if a party knew or ought to have known of the mistake. The latter situation would include cases in which the party refrained from making enquiries or failed to make enquiries when these were reasonably called for, but first there must be a real reason to suspect a mistake. Such an approach would be consistent with the recent decision of the House of Lords on mistakes in contractual notices……". The 1st Tenancy Agreement and the 2nd Tenancy Agreement 8.The 1st Tenancy Agreement is marked exhibit P1. It is a printed form made out in Chinese on a sheet of blue paper over 15 inches wide and over 10 inches long. The fonts are big. It contains 10 printed clauses. Ready made Tenancy Agreements in similar formats are readily available in stationery shops. The 1st Defendant was designated as Party A （甲方）and the Plaintiff as Party B（乙方）therein. 9.Clause 6 of the 1st Tenancy Agreement is in such terms: "Party A shall pay all the rates, property tax, land tax and government rent of the Shop; all other miscellaneous charges, lift charges, pump charges, management fees shall all be paid by Party A （該鋪所有之差餉物業稅地稅地租概由甲方支付其他一切什費電梯費泵費管理費等一概由甲方支付。）" Some charges originally provided for in the printed form were crossed out by hand with double lines. They are water and electricity charges（水電費）and cleaning charges（清潔費）. 10.The 2nd Tenancy Agreement is marked exhibit P2 and made out in similar fashion as the 1st Tenancy Agreement. The 1st, 2nd and 3rd Defendants were also designated as Party A （甲方）and the Plaintiff as Party B（乙方）therein. 11.Clause 6 of the 2nd Tenancy Agreement is in such terms: " 該樓所有之差餉物業稅地稅地租概由甲方支付，其他一切什費、煤、管理費等一概由甲方支付". Some charges provided for in the printed form were crossed out by hand by double lines. The crossed out charges were water and electricity charges（水、電）and telephone charges（電話）. Although the Defendants contended that the provision of "煤…費" in Clause 6 means "coal charges", I have no difficulty in finding that it refers to " coal gas charges" rather than "coal charges". Common sense must be applied in the construction of a contractual term. People in Hong Kong do not burn coal as a consumer fuel. So in English, Clause 6 of the 2nd Tenancy Agreement would read as follows: "Party A shall pay all the rates, property tax, land tax and government rent of the Shop; all other miscellaneous charges, gas charges, management fees shall all be paid by Party A". The case on each side 12.It is not in dispute that the 1st, 2nd and 3rd Defendants were at all material times the registered co-owners of the Shop and that they were tenants-in-common each holding 1/3 share. 13.It is not in dispute that only the 1st Defendant and the Plaintiff were the contracting parties under the 1st Tenancy Agreement. The 1st Tenancy Agreement was for a term of 3 years commencing from 1 March 2003 and expiring on 28 February 2006. The monthly rent was $56,000.00. The 1st Defendant was the landlord and the Plaintiff was the tenant. 14.It is not in dispute that the Defendants had let the Shop to a number of tenants for use as a restaurant since about 1989. The tenant that immediately preceded the Plaintiff was one Mr. Lee Wing Kit who introduced the Plaintiff to the 1st Defendant for taking up the lease of the Shop. 15.It is not in dispute that coal gas was all along practically the only fuel used by the operators of the restaurants at the Shop. 16.It is not in dispute that at the time of the signing of the 2nd Tenancy Agreement, the Defendants were not told of and they did not know the amount of the gas charges for the Shop. 17.It is the case of the Defendants that they were aware of the fact that the charges for coal gas consumed at the Shop would be substantial. The 2nd Defendant estimated the amount of such gas charges to be not less than $10,000.00 but not more than $25,000.00 per month. It is the Plaintiff's case that the average consumption was about $20,000.00 per month. 18.It is not in dispute that prior to the signing of the 2nd Tenancy Agreement, there was no discussion between the parties with explicit reference to the payment of gas charges for the Shop. 19.The Plaintiff's case is that at the time of entering into the 1st Tenancy Agreement, the 1st Defendant had assured him that there would be no problem with renewing the lease of the Shop when the original term expires. 20.The Defendants' case is that at the time of entering into the 1st Tenancy Agreement, the 1st Defendant had asked the Plaintiff if he would want a longer lease but the Plaintiff said that three years would be sufficient. The situation was not that the Plaintiff had asked for a longer lease but the 1st Defendant refused to do so while at the same time assuring the Plaintiff that there should be no problem with renewal of the lease in the future. 21.It is not in dispute that from the time of entering into the 1st Tenancy Agreement onward, the Plaintiff had assumed that the 1st Defendant to be the sole owner of the Shop all along and he came to be aware of the fact that the Shop was co-owned by all the three Defendants only in late February 2005. 22.It is not in dispute that the Plaintiff had paid the 1st Defendant a sum of $168,000.00 as rental deposit under the 1st Tenancy Agreement. The 1st Tenancy Agreement however only showed incorrectly the payment of a rental deposit of $56,000.00. It is not in dispute that the details of the 1st Tenancy Agreement were filled out by the wife of the Plaintiff (PW2). 23.It is not in dispute that pursuant to the 1st Tenancy Agreement, the Plaintiff took possession of the Shop on 1 March 2003 and except for a short period during which the 1st Defendant agreed to a reduction of rent when Hong Kong was hard hit by the deadly epidemic SARS, the relationship between the parties was uneventful until sometime in late February 2005. 24.There is dispute between the parties as to whether the Plaintiff was given a reduction of rent in the amount of $8,000.00 per month for three months or two months during the SARS period. The Plaintiff's case is that the rent was reduced only for two months whereas the Defendants' case is that the rent was reduced for three months. I see no need to resolve this difference in this trial. 25.It is not in dispute that in about late February 2005, the 3rd Defendant on behalf of all the Defendants had requested the Plaintiff to sign a Tenancy Agreement in respect of the Shop. 26.It is the Defendants' case that the 3rd Defendant had told the Plaintiff that the proposed replacement Tenancy Agreement would contain terms and conditions to the same effect as the 1st Tenancy Agreement save for a few changes. One of the changes was to give the correct description of the Shop. Under the 1st Tenancy Agreement, the Shop was described as " 灣仔船街1-3 號寶業大廈C, D地鋪" (emphasis my own). It was to be changed to the correct description of "灣仔船街1-7 號寶業大廈3, 4號地鋪" (emphasis my own). Another change was to correct the amount of rental deposit held from the Plaintiff. The figure was to be changed from "$56,000.00", which was incorrect, to the correct figure of "$168,000.00". Yet another change was to provide for all the three Defendants to be the Landlord instead of only the 1st Defendant. 27.It is the Defendants' case that the Plaintiff was told that the proposed replacement Tenancy Agreement was to effect the abovementioned three changes and nothing beyond that. 28.It is not in dispute that the 1st Defendant had also been in contact with the Plaintiff in relation to the signing of the proposed replacement Tenancy Agreement. 29.It is not in dispute that the Defendants were then contemplating the sale of the Shop subject to the tenancy and that provided the impetus for them to put matters relating to the tenancy straight. The Defendants' case is that they entered into a Provisional Agreement for Sale and Purchase of the Shop with the buyer on 1 March 2005. The buyer required them to effect the abovementioned changes to the 1st Tenancy Agreement. (Included in the trial bundle is a Provisional Agreement for the Sale and Purchase of the Shop. It has never been stamped and is not admissible as evidence). 30.It is not in dispute that the 3rd Defendant had informed the Plaintiff that the Defendants were thinking of selling the Shop subject to the tenancy. 31.It is not in dispute that the 2nd Defendant had never been in direct contact with the Plaintiff or his wife. It is not in dispute that when the 1st Defendant and the 3rd Defendant approached the Plaintiff with the request for the latter to sign the proposed Tenancy Agreement, the Plaintiff had refused to do so. The Plaintiff had counter proposed a renewal of the tenancy for 2-3 years beyond the original term under the 1st Tenancy Agreement. It is not in dispute that the counter proposal of the Plaintiff was not accepted by the Defendants. It is not in dispute that the Plaintiff had indicated his refusal to sign the proposed Tenancy Agreement. 32.It is the Plaintiff's case that he had informed the Defendants that he would not sign the proposed Tenancy Agreement unless the Defendants would provide him with some compensation or benefits. This is disputed. 33.It is the Plaintiff's case that he had told the 1st Defendant that he would leave it to the Defendants to consider what kind of compensation or benefits they would be willing to provide to him. This is also disputed. 34.It is the Plaintiff's case that the 3rd Defendant had been approaching the Plaintiff at the Shop for quite a number of times since late February 2005 with a view to persuade him to sign the proposed Tenancy Agreement. During those visits to the Shop, the 3rd Defendant had carried with her the proposed Tenancy Agreement but the Plaintiff did not even bother to read the contents. This is disputed by the Defendants. 35.The case of the Defendants is that the 3rd Defendant had never time and again visited the Shop taking with her the proposed replacement Tenancy Agreement. Rather it was a one-off incident on 1 March 2005 that the 3rd Defendant took the proposed replacement Tenancy Agreement (which eventually became the 2nd Tenancy Agreement) to the Shop and the Plaintiff took hold of it. On that occasion, the Plaintiff simply told the 3rd Defendant that he would take the proposed replacement Tenancy Agreement to his solicitors for advice. The 1st Defendant did however agree that he had approached the Plaintiff a number of times trying to persuade the latter to sign the proposed replacement Tenancy Agreement. 36.It is not in dispute that when the 3rd Defendant passed the proposed Tenancy Agreement to the Plaintiff, it was already signed by all the Defendants. The Defendants' case is that this took place on 1 March 2005. 37.It is the Plaintiff's case that when the proposed Tenancy Agreement came into his hands, Clause 1 thereof stated the term of the tenancy as commencing on 1 March 2005. This is disputed. The Defendants' case is that when the proposed replacement Tenancy Agreement was handed by the 3rd Defendant to the Plaintiff, Clause 1 thereof had already been amended to show the commencement date of the term of the tenancy to be on 1 March 2003 instead of 1 March 2005. 38.It is the Plaintiff's case that after the 3rd Defendant had passed the proposed Tenancy Agreement to him, the 3rd Defendant then left the Shop and met his wife (PW2) in the street. The 3rd Defendant told PW2 that the proposed Tenancy Agreement contained the benefits offered by the Defendants. This is disputed. The Defendants' case is that there was no such encounter at all. 39.It is the Plaintiff's case that PW2 then returned to the Shop. She looked at the proposed Tenancy Agreement and spotted that Clause 6 provided for the payment of gas charges by the Defendants. She also noted that Clause 1 stated the commencement date of the tenancy to be on 1 March 2005 instead of 1 March 2003. PW2 then called the 1st Defendant asking the latter to amend Clause 1 of the proposed Tenancy Agreement to show the commencement date of the term to be on 1 March 2003 instead of 1 March 2005. PW2 then brought the proposed Tenancy Agreement back to the Defendants and left it with them. The Defendants later amended Clause 1 of the proposed Tenancy Agreement and had it returned to the Plaintiff. The Plaintiff then signed the proposed Tenancy Agreement and it became the 2nd Tenancy Agreement. This is disputed. 40.It is the case of the Defendants that neither the 1st Defendant nor the 3rd Defendant had ever informed the Plaintiff or his wife (PW2) that the proposed replacement Tenancy Agreement would provide for any sort of compensation or benefits for the Plaintiff. 41.It is the Defendants' case that on 1 March 2005, the Defendants asked one Mr. Lee Wai Ming (DW4) who was the estate agent instrumental in bringing about the sale of the Shop to fill out the proposed replacement Tenancy Agreement for them. The 3rd Defendant then took it to the Plaintiff at the Shop and explained to him the differences (the three changes mentioned in paragraph 26 above) between the 1st Tenancy Agreement and the proposed replacement Tenancy Agreement. The Plaintiff took hold of the proposed replacement Tenancy Agreement and said that he would have to consult his lawyer for advice before he would sign it. Subsequent thereto, the 3rd Defendant chased the Plaintiff for the proposed replacement Tenancy Agreement a number of times and it was on about 16 March 2005 that PW2 delivered the 2nd Tenancy Agreement duly signed by the Plaintiff to the Defendants. Witnesses 42.On the Plaintiff's side two witnesses testified. They were the Plaintiff himself and his wife (PW2). On the Defendants' side, all three Defendants testified. The 1st Defendant was born in 1947. He had been successful in his business and he owned a number of properties including the Shop. He was the husband of the 3rd Defendant. The 2nd Defendant was his younger brother. Apart from the three Defendants, they had also called Mr. Lee Wai Ming (DW4), the estate agent, to testify on their behalf. Conflict between the evidence of the 3rd Defendant and DW4 43.There were discrepancies between the evidence of the 3rd Defendant and that of DW4. The 3rd Defendant said that it was she who bought the printed form for the proposed replacement Tenancy Agreement which later became the 2nd Tenancy Agreement. DW4 said that it was he who had bought it. I prefer the 3rd Defendant's version to that of DW4. DW4 did not mention in his witness statement that he had bought the Tenancy Agreement form. The 3rd Defendant did. Discussion and Findings 44.The Plaintiff's version is in conflict with the Defendants' version. Which version should I prefer? I consider that I am entitled to take judicial notice that in small commercial lettings of this nature (between individuals) in the local setting, it is extremely rare for a landlord to agree to pay the gas charges for his tenant. 45.It is clear that when the Defendants requested the Plaintiff to sign the proposed replacement Tenancy Agreement, the Defendants were asking the Plaintiff for a favour to do something that he was not legally bound to do. The Plaintiff could seize the opportunity and dictate terms. However, the Plaintiff's evidence is that he had left it to the Defendants to figure out what sort of compensation or benefit they would be willing to give him. I find this rather improbable. There was nothing to prevent the Plaintiff from asking for a specific sum of money as compensation if as he said, he had brought up the question of compensation or benefit with the Defendants (apart from his request for a renewal of the lease). If the question of compensation or benefit was ever brought up, the natural thing for the Plaintiff to do is obviously to put forth a specific demand and go on from there to bargain for an acceptable deal. The Plaintiff's evidence, however, is that he had not made any specific demand. There was no discussion whatsoever between the parties concerning the alleged gas charges benefit. 46.I find it rather improbable that the Defendants would have agreed to pay the gas charges for the Shop when they were aware that such charges would be substantial. There is no provision in the 2nd Tenancy Agreement for setting a ceiling to such payment. 47.I reject the Plaintiff's evidence that the thought of the Defendants' having made a mistake (about the payment of gas charges for the Shop) had never crossed his mind. The mistake is obvious and ought to have been apparent to any reasonable man. The Plaintiff ought to have known of the mistake. I find that the Plaintiff did consider the possibility of mistake but had deliberately refrained from making enquiries with the Defendants in that connection to avoid drawing their attention to the mistake. 48.If I were to accept the Plaintiff's version, it would be akin to accepting that the Defendants had tricked the Plaintiff into signing the 2nd Tenancy Agreement (with full knowledge that it provides for the payment of the gas charges for the Shop on their part) so that they could smoothly close the deal for the sale of the Shop while all along they had no intention whatsoever to perform that obligation. If indeed it were so, the Defendants would have been consciously assuming a risk of a rather substantial magnitude. They would be left to their own words of mouth against what is set out in writing. I have considered this possibility but in the end, I have dismissed it. 49.In this connection, I consider the discrepancies between the evidence of the 3rd Defendant and DW4 as enhancing, rather than diminishing, the credibility of the case of the Defendants. 50.I have considered, among other things, the manner in which the 2nd Tenancy Agreement was made out and also the fact that all three Defendants had signed them and thus each had the opportunity to examine its contents. Their case is that all three of them had overlooked the Clause 6 provision for the gas charges, so had DW4. A mistake made by all three Defendants together with DW4 is less likely to have occurred than a mistake made by only one of them. Nevertheless, none of the three Defendants and DW4 has the calibre of a C.E.O. and I accept that it was what had actually happened. It was a mistake, not a design. 51.I find that the 2nd Tenancy Agreement is void by reason of the mistake. In other words, the mistake does not merely vitiate the promise to pay the gas charges under Clause 6. 52.On the question of credibility of the witnesses, in general I prefer the evidence of the Defendants to that of the witnesses on the Plaintiff's side. I therefore find the facts of this case on the basis of what I have already set out above as matters not in dispute between the parties and also along the lines of the Defendants' case. 53.In the circumstances, the Plaintiff's main claim on the gas charges must fail. Miscellaneous Charges（什費） 54.Apart from his claim for gas charges, the Plaintiff has two other claims. One of the other claims is for general cleaning charges in the sum of $29,700.00. The other claim is for toilet cleaning charges in the sum of $20,400.00. The general cleaning charges and the toilet cleaning charges are both taken to be miscellaneous charges （什費）provided for under Clause 6. The Plaintiff had engaged a company called Swisher HK to provide cleaning and pest control services to the Shop and the general cleaning charges were the service charges of Swisher HK. The Plaintiff had engaged a female to clean the male and female toilets of the Shop and the female cleaner was paid $1,100.00 per month for the job. The toilet cleaning charges represent such payments. 55.The Plaintiff in his Statement of Claim pleads a Tenancy Agreement without stating its date. There are two Tenancy Agreements: the 1st Tenancy Agreement and the 2nd Tenancy Agreement. However, only the 2nd Tenancy Agreement in Clause 6 provides for the payment of gas charges. The Plaintiff's case must therefore be viewed as a claim based on the 2nd Tenancy Agreement. The 2nd Tenancy Agreement is void for mistake. Thus, the Plaintiff's claims for the miscellaneous charges must also fail. Orders 56.The Plaintiff's claims are all dismissed. There be an Order Nisi that the Plaintiff do pay the costs of the 1st, 2nd and 3rd Defendants to be taxed if not agreed. Unless there is an application to vary this Order Nisi, it will become absolute in 14 days.
Representation: The Plaintiff: appearing in person The 1st, 2nd and 3rd Defendants: appearing in person |
Further hearings and rulings under DCCJ 1588/2006