Ng Hung Kwong v. Vipin Enterprises Ltd and Another
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DCCJ 1608/2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1608 OF 2006 ______________________ BETWEEN
______________________ Coram : H.H. Judge Chow Hearing date : 7th, 10th, 11th September and 9th November 2007 Date of handing down Judgment : 22nd January 2008 JUDGMENT 1.This is the Plaintiff’s application against the 1st Defendant for rescission of a tenancy agreement, and for an order for return of the rental deposit of $84,000 and damages, and against the 2nd Defendant for damages. On the other hand the 1st Defendant counterclaims against the Plaintiff for breach of the tenancy agreement in question. 2.The 1st Defendant was at the material times the registered owner of the property known as Flat A, 7th Floor, Fairview Garden, No. 63 Blue Pool Road, Happy Valley, Hong Kong (“the Property”). The Plaintiff claims that the 2nd Defendant was the agent of the 1st Defendant for introducing, and the leasing and/or letting of the Property to him. The Plaintiff’s evidence 3.In or about early June 2005, the Plaintiff and his wife approached the 2nd Defendant’s office at Happy Valley for the purpose of renting an apartment. They were shown the Property by Dora Chan of the 2nd Defendant, who was acting as the agent of the 1st Defendant. At that time the Property was occupied by another tenant. The building was constructed about 35 years ago. He asked Dora Chan if the Property had any problem with water leakage, and whether its electrical wiring was safe and not defective. Dora Chan replied that the 1st Defendant had rewired the Property after purchasing it in June 2004 and had invested several hundred thousands of dollars to renovate and up-grade the Property (“the representations”). Relying on the representations he entered into the preliminary tenancy agreement dated 13 June 2005 and a tenancy agreement dated 10 August 2005 with the 1st Defendant to rent the Property at a monthly rental of $42,000. He paid a deposit of $84,000. 4.He received the keys of the Property on or about 11August 2005. On or about 8 September 2005, there were two short circuits of electricity when his wife was doing ironing in the study room. He arranged a registered electrician, a Mr. Chow Chi Wah (“Chow”), to inspect the electrical installation of the Property. On or about 12 September, 2005, Chow attended the Property and inspected the fuse box and most of the sockets. Chow told him that the 13A sockets in the living room were only connected by 6A wiring. Such wires were unable to carry the electric current for appliances using 13A plugs. When large output appliances (such as heaters) were connected to these sockets, the wires would be overloaded and overheated. It would be highly probably that these wires would melt and cause fire hazard. In the guest bedroom, the 13A socket for air-conditioner was sub-connected by another 13A socket within the same room. In the living room, the power supply of 13A sockets were connected from the light switches. 5.In the fuse box there were three 6A fuses, one 10A fuse, four 15A fuses and two 30A fuses. Two of these fuses, namely one 6A fuse and one 10A fuse, were connected together by an extra-linking wire (“the linked 6A and 10A fuses”) for output to four 13A sockets, two lights, one balcony light, one corridor light and two 13A sockets in the kitchen. The linked 6A and 10A fuses would affect the normal function of cutting off power when overloaded. 6.The other two 6A fuses were obviously overloaded. One of these was for output to one 13A socket and the light in the bedroom, three lights and the ventilation fan in the guest bathroom, two lights in the servant room, two lights in the store room and one 13A socket in the kitchen for the ventilation fan, the kitchen range hood and the electric oven provided by the 1st Defendant which required 2200W output. 7.The other 6A fuse was for two 13A sockets, four lights and ventilation fan in the master bathroom, three 13A sockets and light in the study room and one 13A socket in the living room. 8.On or about 12 September 2005, the Plaintiff called Mr. Young (“Young”) of the 1st Defendant to rectify the wiring defects of the Property, and he mentioned that the representations were untrue. Young denied that the representations had been made, and averred that he was misled by the 2nd Defendant to enter into the tenancy. 9.At his request, the 1st Defendant sent its electrician, a Mr. Wong (“Wong”) to inspect the Property on 16 September 2005. After hearing his complaints and worries of the electrical conditions of the Property and inspecting the Property, Wong claimed that only the wiring of the kitchen would be fixed up. Particularly a separate wire for the electric oven would be installed as the nearest socket was not able to supply adequate power to the electric oven. When he asked Wong how to use the heater in winter and the electric-cooker for hot-pot, he confirmed that the sockets in the dining room were not safe for such large output appliances and suggested him to use the socket for the air-conditioner. Suspecting that the proposed arrangement could not remove the threat of fire hazard for the overloaded fuses and wires, he reported the case to the Electrical and Mechanical Services Department (“EMSD”). The EMSD sent its staff member to inspect the Property on 20th September 2005. The EMSD’s staff member told him that the partial remedial work proposed by the 1st Defendant’s electrician was illegal. 10.On 21September 2005, through his solicitors he demanded the 1st Defendant to arrange an acceptable course of remedial works. The 1st Defendant immediately replied by fax and marked on his said demand letter that, inter alia, “if your client is less confrontational and more diplomatic, he could obtain co-operation.” 11.He received a letter of the EMSD dated 21 September 2005 on or about 23 September 2005 and forwarded it to the 1st Defendant on 26 September 2005 through his solicitors, requiring the 1st Defendant to employ a registered electrical contractor to rectify the specified defects listed therein. The 1st Defendant sent Wong and another man to inspect the Property on 2 October 2005. Wong told the Plaintiff that the remedial works would require at least three weeks’ time to complete. During that period of time, the electricity supply of the Property would be cut off. Further, his occupation at the Property would make the remedial works impossible to be carried out. In view of this, he requested, through his solicitors’ letter dated 3October 2005, the 1st Defendant to confirm (i) whether remedial works would be carried out and (ii) what arrangement would be made for him to vacate the Property for the works. The 1st Defendant immediately replied by fax and marked on the said letter, inter alia, “We have no obligation to do any more work than was agreed at commencement of the tenancy at the rent your client agreed to pay. Any further work we do is entirely voluntary and on goodwill….. Please withdraw these.” The 1st Defendant’s electrician did not contact him after 2 October 2005. 12.Since the 1st Defendant had repeatedly refused to rectify the situation he had no choice but to find an alternative accommodation and vacated the Property on 22 October 2005. He suffered the following losses and damages:-
The evidence of the 1st Defendant 13.The 1st Defendant called three witnesses to testify on its behalf. They are Mr. Young Tat Chiu Thomas (“Young”), Wong Kai Wong (“Wong”), and Leung Cheuk See Beatrice (“Leung”). Young is a director of the 1st Defendant. According to him, Dora Chan had never relayed to him that she had made any representations and/or warranties as pleaded by the Plaintiff in the Statement of Claim. The evidence of Young Tat Chiu Thomas 14.On or about 28 July 2005, the 1st Defendant prepared a draft formal tenancy agreement and through the 2nd Defendant sent the same to the Plaintiff’s solicitors. 15.In or about early or middle September, 2005, the Plaintiff complained to the 1st Defendant and insisted on the following matters:-
16.On or about 21 September 2005, the 1st Defendant received a letter from the Plaintiff’s solicitors, demanding the 1st Defendant to carry out rectification works to the Property within 7 days, failing which the Plaintiff would seek another substitute property for residence, and in the meantime, the Plaintiff would withhold paying rent to the 1st Defendant. On the same day, the 1st Defendant made objection to the Plaintiff in writing in respect of the withholding of the payment of rent. 17.On or about 26 September 2005, the 1st Defendant received another letter from the Plaintiff’s solicitors enclosing the copy of letter dated 21 September 2005 from the EMSD for the 1st Defendant’s immediate action. In the letter, the EMSD set out the defects found at the Property on 20 September 2005. On or about 27 September 2005, the 1st Defendant sent a fax to the Plaintiff’s solicitors, requesting the Plaintiff to contact the registered electrician, a Mr. Wong, to schedule the specified works as required by EMSD. 18.Subsequently, Wong reported to him that he had inspected the Property twice and explained to the Plaintiff the rectification works to be done in accordance with EMSD’s letter dated 21 September 2005. Wong also reported that the Plaintiff was more interested in vacating the premises than replacing the wiring. The Plaintiff kept repeating that the premises was uninhabitable and pressuring Wong to agree. The Plaintiff refused appointments for Wong to do the rectification works as required by the ESMD on subsequent calls by Wong. The evidence of Wong Kai Wong 19.In or about early September 2005, Young instructed him to investigate and fix the defects that the Plaintiff complained about. On or about 16September 2005, he inspected the Property. During the inspection, he found that the wiring of the Property, which consisted of 5 amp and 15 amp wiring, were mostly original and typical of 30 years old building. He also found that the original 5 amp sockets had been replaced by new 13 amp sockets. Most of the 15 amp sockets were still the old round pin type. On that occasion, he showed the Plaintiff the sockets, which had 15 amp wiring, to be used for heavy appliances. He told him that he would rewire all the 5 amp sockets and install a new socket for the oven, which would take about 2 days, on the dates to be mutually scheduled. He gave him his phone number for scheduling. Thereafter, the Plaintiff did not contact him. 20.About one or two weeks later, Young instructed him to fix the defects found at the Property as stated in a letter dated 21 September 2005 from the EMSD. On or about 2 October 2005, he visited the Property again. He explained to the Plaintiff the rectification works to be done in accordance with the EMSD’s letter dated 21 September 2005. On this occasion, the Plaintiff was less interested in fixing the defects but insisting on a complete rewiring, concealed inside the walls, re-plastered and repainted. The Plaintiff asked him to relate to the 1st Defendant that he required the 1st Defendant to provide him with another flat because the Property would be uninhabitable when it was under repair. In response, he told the Plaintiff that it was not necessary to rewire completely and this was not required by EMSD as the letter issued by the EMSD did not mention about complete rewiring. However, the Plaintiff still insisted on complete rewiring. He urged the Plaintiff to schedule quickly the dates for carrying out the earlier proposed work plus the remedial works as required by EMSD. He told the Plaintiff that he would come back the next day to install a new socket for the oven but the Plaintiff declined, saying that he would negotiate the conditions with the 1st Defendant first. He asked him to state to the 1st Defendant that: (i) the Property was uninhabitable; (ii) the Property needed complete rewiring; and (iii) give the Plaintiff another flat. Wong conveyed what the Plaintiff had said to Young. 21.About 2 weeks later he called the Plaintiff but he declined to schedule and said that he was still negotiating with the 1st Defendant. In late October, he called the Plaintiff but was unable to contact him. He then called the 1st Defendant who told him that the Plaintiff had vacated the Property. The evidence of Leung Cheuk See Beatrice 22.She is the manager of Bestway Realty Co., a property management company. She assisted the 1st Defendant in finding prospective tenant and referring offers to the 1st Defendant for its consideration. She denied that she had said to Dora Chan the phrase “水喉、電線做過晒、換過晒”. She did not know how much the 1st Defendant had spent as decoration on the Property. She did not say to Dora Chan that the decoration costs amounted to $400,000. 23.She conveyed the Plaintiff’s offers and the requests made by Dora Chan to the 1st Defendant and conveyed the 1st Defendant’s responses back to Dora Chan. The provisional tenancy agreement prepared by the 2nd Defendant was forwarded to the 1st Defendant. The 1st Defendant instructed her to sign the provisional tenancy agreement on its behalf and stamp its company chop thereon as Young, the person-in-charge of the 1st Defendant, was not available at that time. The evidence of the 2nd Defendant 24.Dora Chan testified on behalf of the 2nd Defendant. She is and was the real estate agent of the 2nd Defendant. On or about 8 June 2005, she took the Plaintiff and his wife to view the Property. During the inspection the then tenant of the Property said that the Property had no problem, save that the tap at the kitchen sink discharged water rather slowly and that the reception for Cable TV was rather poor. The inspection lasted for about 15 minutes. Then the Plaintiff’s wife requested her to ask the landlord why the said discharge of water was so slow. She agreed to do so. In the afternoon of 8 June 2005, she contacted a Miss Leung, the representative of the 1st Defendant. Miss Leung told her that the Property was purchased by the 1st Defendant in or about 2004 and it had been refurbished by the 1st Defendant at about $400,000, and that the 1st Defendant had changed the electrical wiring and water pipes at the Property. The words she said in Chinese are:“水喉、電線做過晒，換過晒”. 25.After the conversation with Miss Leung, she reported the same to the Plaintiff’s wife. On or about 9June 2005, the Plaintiff’s wife called her and said that she had discussed the matter with the Plaintiff, and they would accept the offer to lease the Property at $42,000, subject to the insert of Clause 19 in the preliminary tenancy agreement. She reported the matter to Miss Leung. At the end both parties agreed on the contents of the preliminary tenancy agreement. On 13 June 2005, she brought the preliminary tenancy agreement to Miss Leung at her office. Shortly thereafter Miss Leung returned a duly executed preliminary tenancy agreement back to her. On 10 August 2005, the formal agreement was signed. 26.In early September 2005, the Plaintiff’s wife called her and enquired if the 1st Defendant had told her that the electrical wiring and water had been changed. She replied that they were and that the 1st Defendant’s representative represented to her that the 1st Defendant had spent about $400,000 on the Property’s renovation. 27.A few days later, the Plaintiff’s wife called her and said that whilst ironing, she encountered an electrical short-circuit. She then requested her to inform the 1st Defendant and to request the 1st Defendant to instruct a contractor to inspect and repair the same at the Property. She called Miss Leung and informed her of the electrical short-circuit problem encountered by the Plaintiff’s wife. Miss Leung agreed to look for a technician and said that she would contact the Plaintiff directly. She then reported the same to the Plaintiff’s wife. 28.Sometime after mid-September 2005, the Plaintiff called to say that he would request an electrical technician from the EMSD to check on the electrical wiring in the Property. Afterwards the Plaintiff called her and informed her that the installation of the electrical wiring at the Property did not comply with the proper standard. She then reported the same to Miss Leung. Miss Leung said that she would inform her superior, a Mr. Yeung (“Young”). 29.On 10 May 2006, Young called her and asked her whether she had mistakenly told the Plaintiff about the electrical wiring at the Property. She replied that she had been told by Miss Leung that the Property had been purchased in 2004 and had been refurbished at a cost of HK$400,000.00. Further Miss Leung had told her that the 1st Defendant had changed the electrical wiring and the water pipes at the Property. The exact Chinese phrases are “水喉、電線做過晒、換過晒”. 30.Young then said that the above conversation between the two of them had taken place a year ago and that she might have forgotten the exact details of the same, that they had not appointed the 2nd Defendant to lease the Property for them and that the 2nd Defendant had only solicited for business. She denied this fact and told Young that Miss Leung acting as his representative had appointed the 2nd Defendant to act as the 1st Defendant’s agent. He asked her whether she had deceived the Plaintiff by representing to him on the electrical wiring of the Property in order to complete the deal. She replied that she had not misrepresented to the Plaintiff and that she had no reason to deceive the Plaintiff. He then asked again whether she had remembered correctly and said that perhaps her memory had lapsed. She repeated to him that she had not. He then called off. About one minute later, he called her again and repeated that Miss Leung would not have said those things to her and she again replied that Ms. Leung had in fact told her such things. Analysis of the evidence 31.The central issue of the case I have to decide is whether the representations were made. Dora Chan said that on 8 June 2005, Leung told her the representations, and she reported the same to the Plaintiff’s wife. Leung denied having made the representations. 32.According to the Plaintiff, in early June 2005, Dora Chan told the Plaintiff and his wife that the 1st Defendant had rewired the Property after purchasing the same in June 2004. That took place after the inspection of the Property in early June, 2005. According to Dora Chan’s evidence, the inspection took place on 8June 2005, and the representations were made after the inspection of the property on that day. Her evidence corroborated the evidence of the Plaintiff. In its written submission, the 1st Defendant argued that the Plaintiff claims the alleged misrepresentation took place on 8 September 2005 at 9:30 a.m. in the lift when it was going up before viewing the Property whereas Dora Chan claims she contacted Leung on the same day in the afternoon asking about water and electrical. Thus there is a conflict of evidence between the two of them. The viewing of the Property could not have taken place in September, 2005, because the tenancy agreement of the Property was signed in August, 2005. Thus the misrepresentations could not have been made in September. By that time the Plaintiff had already moved into the Property. 33.Dora Chan is a witness for the 2nd Defendant. The admission of making the representations would be against the interest of the 2nd Defendant, because without the representations the Plaintiff’s case against the 2nd Defendant simply cannot stand. I do not believe that Dora Chan would lie to this Court. I accept all the evidence given by Dora Chan. 34.I find that Miss Leung did make the representations to Dora Chan, who passed the same to the Plaintiff. I also find that the Plaintiff relied on the representations when he entered into the tenancy agreement. There is no doubt that the wires had not been renewed prior to the creation of the tenancy agreement. Therefore the representations made by Miss Leung were not truthful. She passed these representations recklessly, not caring whether these representations were truthful or not. 35.On 21September 2005, the Plaintiff’s solicitors wrote to the 1st Defendant, stating that :-
The 1st Defendant replied on the same day, stating:-
The 1st Defendant did not refute the Plaintiff’s allegations referred to in its letter in respect of the representations. I find that the allegations are true. 36.On 3October 2005, the Plaintiff’s solicitors wrote to the 1st Defendant, saying,
On the same day, the 1st Defendant faxed a reply to the Plaintiff:-
The 1st Defendant did not refute the allegations made in the Plaintiff’s letter dated 3October 2005. I find that the allegations are true. Was the 2nd Defendant acting as the 1st Defendant’s agent? 37.The 1st Defendant submitted that the 2nd Defendant was not acting as its agent at the material times. It states “D.1. Releases information on properties to hundreds and possibly thousand of recipients on its mailing list and website including hundreds of brokers listing properties on the market to rent. D1 is aware these broker/agents, if they are agents in the legal sense it has to bear massive responsibility for what they say and do. Therefore D1 is conscious to not create any legal agency until and unless it is offered a acceptable deals fiduciary duties are not present nor all they desired in the broker relationship with D1.” The 1st Defendant did not adduce any documentary evidence relating to mailing list and website to support its submission. 38.On the other hand, the case of the 2nd Defendant is that it was the agent of the 1st Defendant. Miss Leung admitted that she had instructed the 2nd Defendant to lease out the Property. By appointing the 2nd Defendant as the estate agent of the Property, the 1st Defendant held the 2nd Defendant out as having the usual authority of an estate agent. Therefore the 2nd Defendant had the usual authority to describe the Property and make representations thereof. That includes the representations relating to the conditions of the electrical wiring of the Property made to the Plaintiff. I find that at the material times the 2nd Defendant was acting as the agent of the 1st Defendant. 39.The 1st Defendant submitted that clause 16 of the preliminary tenancy agreement supersedes the allegations (including the representations) made against it. Clause 16 states : “This Agreement supersedes all prior negotiations, representation, understanding and agreements of the parties hereto.” This clause will only apply if negotiations, representation, understanding and agreements were made about the conditions of the Property stated in this preliminary tenancy agreement. There is nothing in the preliminary tenancy agreement relating to the conditions of the Property. Therefore Clause 16 does not apply to the conditions of the Property. 40.I find that the Plaintiff did rely on the representations before entering the tenancy agreement of the Property. The 1st Defendant is liable for the act of its agent, the 2nd Defendant. Therefore the 1st Defendant is liable for the misrepresentations made by the 2nd Defendant. Liability of the 2nd Defendant 41.There is no evidence to show that when the 2nd Defendant passed to the Plaintiff the representations made by Miss Leung, the 2nd Defendant knew that they were false, or that it was reckless in so doing. I find that when the 2nd Defendant passed the representations to the Plaintiff it was not acting recklessly and that it did not know that the representations were false. It should not be liable for the Plaintiff’s claims. I therefore dismiss the Plaintiff’s claims against the 2nd Defendant. Clause 3(b) of the Tenancy Agreement 42.Even if I am wrong in finding that the representations were made, the Plaintiff is entitled to rely on Clause 3 (b) of the tenancy agreement to vacate the Property. Clause 3(b) of the Tenancy Agreement provides:-
From the correspondence unfolded above, the 1st Defendant showed a clear intention of not complying with this condition. The wiring of the Property was improper. The 1st Defendant failed to make proper residential arrangement for the Plaintiff when the rectification works relating to the wiring were done. But the 1st Defendant failed to do so. It failed to observe Clause 3(b). So it was in breach of the tenancy agreement. The Plaintiff was entitled to accept the repudiation of the tenancy agreement by the 1st Defendant. Therefore the 1st Defendant is liable to pay to the Plaintiff the damages claimed by the Plaintiff. 43.I make the following orders:-
44.I further order that the 1st Defendant do within 14 days from today pay to the Plaintiff the sum of $100,360.00 with interests thereon, commencing from 8th May 2006, until satisfaction, at judgement rate. Costs 45.I make an order nisi for costs, to be made absolute in 14 days’ time, that the 1st Defendant do pay costs of this action to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel, and that the Plaintiff do pay costs of this action to the 2nd Defendant, to be taxed, if not agreed, with certificate for Counsel.
The Plaintiff : represented by Mr. Tony Ng, instructed by M/S. Paul T.S. Lam & Co., Solicitors. The 1st Defendant : represented by Mr. Thomas Young Tat Chiu, unrepresented. The 2nd Defendant : represented by Miss Sharron Leung, instructed by M/S Cheung & Choy, Solicitors. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Further hearings and rulings under DCCJ 1608/2006