Tat Ming Investment Co v. Yui Kimura

Case No.DCCJ 3508/2006

Court

District Court

Date—

Judge—

Case Document

100%Judiciary

DCCJ3508/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3508 OF 2006

----------------------

BETWEEN
	TAT MING INVESTMENT COMPANY LIMITED	Plaintiff
	and
	YUI KIMURA	Defendant

----------------------

Coram: H H District Judge Marlene Ng in Court

Dates of Hearing: 15^th and 16^th October and 20^th February 2008

Date of Handing Down Judgment: 23^rd July 2008

----------------------

J U D G M E N T

----------------------

I. Introduction

1. The Plaintiff was/is the registered owner, and the Defendant was the ex-tenant of First Floor, No.16 Pokfield Road, Hong Kong (“Premises”). By a Tenancy Agreement dated 28^th January 2005 (“Tenancy Agreement”), the Plaintiff let the Premises to the Defendant from 1^st February 2005 to 31^st January 2007 (“Term”) at a monthly rent of HK$15,000.00 payable in advance on the 1^st day of each and every calendar month without any deduction (“Tenancy”).

2. The Defendant paid the Plaintiff a sum of HK$15,000.00 as security deposit (“Deposit”). Pursuant to clause 4(g) of the Tenancy Agreement (“Clause 4(g)”), if there shall be no breach of any of the terms/conditions on the part of the Defendant therein contained, the Deposit shall be returned to her “at the expiration of the [Term] or sooner determination of the same”.

3.By the Tenancy Agreement, the Defendant agreed to pay inter alia rates, water charges, management fees and all non-capital outgoings payable during the Term. As evident from the Plaintiff’s debit notes to the Defendant, the practice (which was not challenged) was that these items were also payable in advance on a monthly basis.

4.By an Agreement for the Use of Fixtures and Chattels dated 28^th January 2005 (“Fixture Agreement”), the Plaintiff agreed to provide certain fixtures/chattels for which the Defendant agreed to pay monthly charges of HK$700.00 (“Fixture Charges”) in advance on the 1^st day of each and every calendar month without any deduction.

5.As at 30^th April 2006, the Defendant had not paid rent, rates, water/sewage charges and management fees (collectively, “Charges”) and Fixture Charges for the month of April 2006 (“April Charges” and “April Fixture Charges”).

II. Plaintiff’s claim

6.Clause 7 of the Tenancy Agreement (“Clause 7”) provides inter alia as follows :

“The parties hereto further agree that at any time after 31^st January, 2006 the Tenant shall be desirous of determining this Agreement, he shall …… give two month’s notice in writing to the Landlord to expire on the last day of the relevant month [“Notice Precondition”] …… and shall pay all rents and perform and observe all stipulations and conditions hereinbefore contained and on his part to be performed and observed up to such determination [“Performance Precondition”] then and in such case this Agreement shall determine but without prejudice to any claim by the Landlord against the Tenant in respect of any antecedent breach of any stipulation or condition herein contained.” (my emphasis)

7.The Plaintiff claimed the Defendant failed to satisfy the Notice Precondition because (a) the notice to break the Tenancy Agreement (“Break Notice”) dated 10^th April 2006 (“NTQ”) was invalid and (b) she failed to satisfy the Plaintiff’s precondition for waiving irregularity of the notice period in the NTQ, ie to arrange/attend a joint “marching-out” inspection (“Inspection”) of the Premises before 30^th April 2006 (“Inspection Precondition”). The Plaintiff also claimed the Defendant failed to fulfil the Performance Precondition by not paying the April Charges on or before 30^th April 2006. Hence, the Tenancy Agreement did not determine on 30^th April 2006.

8.The Plaintiff denied the Defendant’s estoppel and/or waiver arguments over the irregularity of the notice period in the NTQ and/or over the operation of the Performance Precondition, especially in light of the non-waiver provision in clause 4(i) of the Tenancy Agreement (“Clause 4(i)”).

9.Since the Tenancy Agreement was still in force after 30^th April 2006, the Plaintiff argued that the Defendant was in breach of contract in failing to pay the Charges and Fixture Charges from 1^st April to 31^st July 2006 in the total sum of HK$68,266.00. On 18^th July 2006, the Plaintiff commenced the present action to recover (a) vacant possession of the Premises, (b) the aforesaid arrears of HK$68,266.00, and (c) mesne profits at the monthly rate of HK$15,000.00 from 1^st August 2006 to the date of delivery of vacant possession of the Premises.

10.There is no dispute that if the Tenancy Agreement was not determined on 30^th April 2006, it was forfeited on 20^th July 2006 upon service of the Writ of Summons herein. The Amended Statement of Claim filed/served on 24^th July 2006 removed the claims set out in paragraph 9(a) and (c) above, so even though the Plaintiff recovered physical possession of the Premises on 31^st January 2007, there was no claim for any mesne profits.

III. Defendant’s defence and counterclaim

11. The Defendant claimed the Notice Precondition was satisfied by the NTQ (a) which was of itself valid or (b) which upon clarification/amendment by the Plaintiff’s letter to the Defendant dated 15^th February 2006 (“15/2/06 Letter”) and/or the Defendant’s letter to the Plaintiff dated 15^th March 2006 (“15/3/06 Letter”) was valid. Further or alternatively or in any event, the Defendant claimed the Plaintiff had waived any irregularity or objection it might have had as to the validity of the NTQ and/or was estopped from denying the same.

12.The Defendant claimed the Plaintiff also fulfilled the Performance Precondition. Further or alternatively or in any event, the Defendant claimed the Plaintiff waived operation of and/or was estopped from relying on the strict terms of the Performance Precondition, and could not seek to rely on the non-waiver provision in Clause 4(i). Consequently, the Tenancy Agreement determined upon expiry of the Break Notice (“Break Date”) on 30^th April 2006.

13. Under the Tenancy Agreement, upon the expiration or sooner determination of the Tenancy the Defendant was required to “[quietly] yield up the [Premises] …… in good and substantial repair ……” under clause 2(r) (“Clause 2(r)”) and to “deliver up vacant possession of the [Premises] to the [Plaintiff] ……” under clause 4(d) (“Clause 4(d)”).

14. The Defendant claimed she moved out of the Premises on 21^st April 2006. By a telephone conversation with the Plaintiff’s building supervisor, Mr Seto Jick (“Mr Seto”), on 28^th April 2006 (“28/4/06 Tel Call”), she arranged for her domestic helper (“Helper”) to attend an Inspection of the Premises on the following day. But on that day the Mr Seto refused to conduct such Inspection and/or accept return of the keys to the Premises (“Keys”). The Defendant claimed that notwithstanding such refusal, she had on 29^th April 2006 complied with her contractual obligations to deliver/yield up vacant possession of the Premises to the Plaintiff.

15.On 18^th May 2006, the Defendant’s solicitors sent to the Plaintiff’s solicitors inter alia the Keys and a cheque for HK$2,066.50 (“Cheque”), ie the outstanding balance of the April Charges and April Fixture Charges after set-off against the Deposit, but the Plaintiff refused to accept return of the Keys.

16.The Defendant denied the Plaintiff’s claim and counterclaimed for (a) a declaration that the Tenancy had been determined on 30^th April 2006 or alternatively on 31^st July 2006, and (b) an order that the Deposit be set-off against any sum found due to the Plaintiff.

IV. Issues

17. The following are the relevant issues on liability :

(a) Was the NTQ a valid Break Notice?

(b) If not, was the Plaintiff estopped from denying its validity?

(c) Alternatively, did the Plaintiff waive any irregularity and/or objection it might have had as to the validity of the NTQ?

(d) Alternatively, did the Plaintiff impose the Inspection Precondition, and if so, whether such precondition was fulfilled?

(e) Was the Performance Precondition a condition precedent for early determination of the Tenancy Agreement?

(f) If so, did the Defendant fulfil the Performance Precondition?

(g) If not, was the Plaintiff estopped from seeking to rely on the strict terms of the Performance Precondition?

(h) Alternatively, did the Plaintiff waive operation of the srict terms of the Performance Precondition?

(i) Was the Defendant precluded from relying on any waiver argument by reason of the non-waiver provision in Clause 4(i)?

(j) Did the Defendant deliver/yield up vacant possession of the Premises to the Plaintiff on 29^th April 2006?

(k) Was the Tenancy Agreement determined on 30^th April 2006?

(l) If not, did the Tenancy Agreement remain in force until it was forfeited on 20^th July 2006?

18. The averments in relation to issues (d), (g) and (h), and consequently the defences thereto, have not been pleaded. But Ms Man, counsel for the Plaintiff, and Mr Toms, solicitor for the Defendant, agreed not to take any pleading point.

19.As regards the issues on quantum, notwithstanding its pleadings, the Plaintiff was prepared to (a) allow set-off of any sum due to the Plaintiff against the Deposit, and (b) limit the Plaintiff’s claim for arrears of the Charges, if successful, up to 20^th July 2006. Thus the Plaintiff’s claim under the Tenancy Agreement was reduced as follows :

HK$

Amount of the Plaintiff’s claim
68,266.00

Less :

(a) rent from 20^th to 31^st July 2006
(5,322.00)

(b) water/sewage charges from 20^th to 31^st July 2006
(21.00)

(c) management fees from 20^th to 31^st July 2006
(212.00)

(d) rates from 20^th to 31^st July 2006
(250.00)

(e) the Cheque
(2,066.50)

(f) set-off against the Deposit
(15,000.00)

Balance :
45,394.50

20.Clause 4(a) of the Fixture Agreement (“Clause 4(a)”) provides as follows :

“In the event of the Tenant exercising the option of early determination contained in Clause 7 of the said Tenancy Agreement by giving two months’ notice to the Landlord this Agreement shall determine at the expiration of the said notice.”

21. Mr Toms argued that termination of the Fixture Agreement under Clause 4(a) was not dependent on fulfilment of the Performance Precondition, so the Plaintiff could not claim for arrears of Fixture Charges for the period from 1^st May to 31^st July 2006 in the sum of HK$2,100.00. Such argument first surfaced in Mr Toms’ written final submissions, so Ms Man’s complaint of lateness was quite understandable. In the end, with commendable pragmatism, Ms Man decided to meet such argument by the following submissions : (a) the NTQ was invalid, (b) the Tenancy Agreement remained in force until it was forfeited on 20^th July 2006, and (c) as at 20^th July 2006 the arrears of Fixture Charges for the month of July 2006 were already due and payable in full.

V. Witnesses

22.Mr Seto and the Defendant both gave evidence. For over 20 years Mr Seto has been the Plaintiff’s building supervisor looking after the Plaintiff’s 2 buildings (including Nos.10-16 Pokfield Road where the Premises were situated) which were leased to various tenants. The Defendant received education up to university undergraduate level and was working in sales marketing for a software company. She has a good command of the English language.

23. Mr Toms in his written final submissions often referred to the Defendant’s “unchallenged” or “uncontested” evidence. It turns out that he was referring to various aspects of the Defendant’s evidence not answered by direct/positive countervailing evidence from the Plaintiff. It must be trite that litigants are not always blessed with the ability to answer every aspect of their opponents’ case by adducing positive countervailing evidence, but it does not lessen the court’s duty to assess credibility/reliability of each party’s witness evidence. I refer to the principles at para.12 of Star Glory Investment Ltd v Kai Tua (H.K.) Technology Ltd & ors HCA3523/2002 (unreported, 13^th August 2005) as follows :

“…… I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(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).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest.’ ……”

24.I disagree with Mr Toms’ observation that Mr Seto was an unsatisfactory/partisan witness who tailored his evidence and anticipated arguments to support the Plaintiff’s position. In my view, Mr Seto is a mature gentleman who, having handled the Plaintiff’s leasing properties for many years, was quite set in his ways in dealing with tenancy issues. Such trait has given rise to some subjective views which I am unable to accept from an objective perspective. Nevertheless, I find him honest/ reliable on the core issues. In particular, I accept his evidence in relation to events that happened in late April 2006, which is a serious blow to the Defendant’s overall credibility.

25. With 2 previous tenancies under her belt, the Defendant, in my view, is certainly not a mere “consumer with little experience of residential tenancies”. She struck me as educated and intelligent, but not credible on a number of key matters. My overall impression is that she was not above shifting her evidence to suit her case, and I disbelieve her on a number of core factual matters.

26.Ms Man criticised the Defendant for not calling the Helper as witness. I will return to such argument below.

VI. Principles on interpretation of documents

27.The present action involves interpretation of various written correspondence between the parties. The applicable principles can be found in the now classic statement of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912-913 endorsed by Ribeiro PJ in Ming Shiu Chung & ors v Ming Shiu Sum & ors (2006) 9 HKCFAR 334, 358, as follows :

“…… The principles may be summarised as follows :

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. ……

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] 2 WLR 945).

(5) The “rule” that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. ……”

28.In Bank of Credit and Commerce International SA v Ali & ors (No.1) [2002] 1 AC 251, 269, Lord Hoffmann went on to say as follows :

“The background is however very important. I should in passing say that when, in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 913, I said that the admissible background included “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man”, …… I was merely saying that there is no conceptual limit to what can be regarded as background. It is not, for example, confined to the factual background but can include …… proved common assumptions which were in fact quite mistaken. But the primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage: “we do not easily accept that people have made linguistic mistakes, particularly in formal documents”. ……”

29. In light of the above, I disagree with Mr Toms’ submissions that I should consider the parties’ subjective intentions in interpreting their written correspondence. In construing such correspondence, I should have regard to the circumstances surrounding their making and to the practical objectives they intended to achieve. Further, in arriving at a construction that would give the most commercial sense in the present context, there was no conceptual limit as to what could be regarded as background save that their declarations of subjective intent should be excluded.

VII. NTQ

(a) Findings of fact

30. On 10^th February 2006, the Defendant issued the NTQ to the Plaintiff inter alia as follows :

“I would like to notify you that I will move out of [the Premises] after two months of notice period according to our residential lease contract. Therefore, the last day of occupancy should be April 10, 2006, however, if you require this flat earlier, I am happy to accommodate your request.”

31.On balance I find that Mr Seto thought even though the NTQ gave an operative Break Date of 10^th April 2006 purportedly in accordance with the Tenancy Agreement, it was invalid since the notice period did not “expire on the last day of the relevant month” (ie 30^th April 2006) as required under the Notice Precondition. So the Plaintiff sent the 15/2/06 Letter to the Defendant as follows :

“ We acknowledge receipt of [the NTQ] notifying us of your intention of moving out of the [Premises] on 10^th April 2006.

Please be advised that in accordance with Clause 7 of the Tenancy Agreement …… the tenant shall “…give two months’ notice in writing to the Landlord to expire on the last day of the relevant month…” As you have given notice to us on 10^th February 2006, the earliest date the Agreement could be terminated would be the last day of April 2006.

We trust the above is in order with you and look forward to receiving your confirmation by return post.”

In my view, it is plain from the tenor of such letter that the Plaintiff regarded the NTQ as invalid for failing to comply with the requisite notice period.

(b) NTQ of itself valid?

32. Mr Toms relied on Leung Chung Ting (No.2) v Tin Yat Company (unreported, CACV8/1963) to say the NTQ was valid. In that case, the landlord issued a notice to the tenants requiring them “to quit and deliver up possession by 19^th November, 1961 or on the last day of the defendants tenancy which should expire next after one calendar month from the date of service of the said notice to quit” (my emphasis). The Court of Appeal held it was permissible for a notice to quit to (a) state the exact date on which the premises were to be given up, (b) express such date in general words, or (c) give 2 alternative dates (eg an exact date as in (a) and in the alternative a date expressed in general words as in (b)), so an error as to the exact date would not invalidate the notice.

33. I am unable to draw assistance from this authority. First, when viewed objectively, the NTQ in saying the Defendant would move out after “two months of notice period” according to the Tenancy Agreement and “therefore” the last day of occupancy “should be” 10^th April 2006 was actually referring to a single Break Date and not 2 alternative dates. Secondly, the NTQ did not adopt the formulation in the Notice Precondition, ie “two month’s notice …… to expire on the last day of the relevant month”, but just referred to “two months of notice period”. Further, the Defendant’s assertion that she would move out “after two months of notice period” (ie 2 months after 10^th February 2006 being the date of the NTQ) coincided perfectly with her other assertion that her last day of occupancy was 10^th April 2006, so objectively speaking the letter put forward 10^th April 2006 as the single Break Date. Such moving out and last occupancy dates did not fall on the last day of the relevant month as required under the Notice Precondition, but the objective interpretation of the NTQ cannot be stretched so widely as to cover an alternative Break Date of 30^th April 2006 in order to satisfy the Notice Precondition.

34.Next, Mr Toms cited Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749. In that case, pursuant to clause 17(3) of the lease, the tenant had the right to break the lease by serving not less than 6 months’ notice in writing on the landlord, such notice to expire on the 3^rd anniversary of the term commencement date (ie 13^th January 1995). The tenant in serving notice that stated “[pursuant] to clause 7(13) of the lease we as tenant hereby give notice to you to determine the lease on 12 January 1995 ……” mistakenly assumed the relevant anniversary was 12^th January 1995.

35.The House of Lords by majority held that the tenant’s notice was effective when construed objectively against the background/context of the terms of the lease since it would be obvious to a reasonable landlord familiar with the lease that the reference to 12^th January 1995 was a mistaken reference to 13^th January 1995, which in fact was the date the tenant meant to identify in the notice and the date which the landlord would have understood him to identify. Thus, the minor error of giving the wrong date could be cured by interpretation.

36. Lord Steyn at pp.767-768 set out 4 steps in his reasoning that led him to conclude that the notice was effective (see also similar reasoning in the speeches of Lords Hoffmann and Clyde, and the endorsement by Lord Goff, who dissented in Mannai Investment Co Ltd, in Investors Compensation Scheme Ltd at p.898) :

“(1) …… The language of [the break clause] must be given its ordinary meaning. ……

(2) The question is not how the landlord understood the notices. The construction of the notices must be approached objectively. The issue is how a reasonable recipient would have understood the notices. And in considering this question the notices must be construed taking into account the relevant objective contextual scene. …… [The] inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind. It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases. Given that the reasonable recipient must be credited with knowledge of the critical date and the terms of [the break clause] the question is simply how the reasonable recipient would have understood such a notice. ……

(3) It is important not to lose sight of the purpose of a notice under the break clause. It serves one purpose only: to inform the landlord that the tenant has decided to determine the lease in accordance with the right reserved. That purpose must be relevant to the construction and validity of the notice. Prima facie one would expect that if a notice unambiguously conveys a decision to determine a court may nowadays ignore immaterial errors which would not have misled a reasonable recipient.

(4) …… Even if such notices under contractual rights reserved contain errors they may be valid if they are ‘sufficiently clear and unambiguous to leave a reasonable recipient in no reasonable doubt as to how and when they are intended to operate’:…… That test postulates that the reasonable recipient is left in no doubt that the right reserved is being exercised. It acknowledges the importance of such notices. The application of that test is principled and cannot cause any injustice to a recipient of the notice. ……” (my emphasis)

37.Here, the real question is whether the NTQ construed against its contextual setting would unambiguously inform a reasonable recipient how and when such notice was to operate under the right reserved. But in applying such test, Mannai Investment Co Ltd did not endorse any slipshod approach to drafting notices to quit. Lord Steyn said at p.773 as follows :

“…… I do not accept the extreme argument of counsel for the tenant that whenever a notice to determine refers to a break clause, and whatever the other circumstances of the case, the notice must be valid. That goes too far. One can easily conceive of much weaker cases where the test posed above could not be satisfied. ……”

Lord Clyde also said at p.781 that “…… there can be cases where the validity of the notice cannot be saved by any construction and will have to be regarded as bad”.

38.The requirements for a Break Notice under the Notice Precondition were as follows : (a) the Defendant must have the desire to determine the Tenancy Agreement, (b) the Defendant shall give the Plaintiff a notice as defined, (c) the notice must be in writing, (d) the notice must be given after 31^st January 2006, and (e) it must give not less than 2 months’ notice that would expire on the last day of the relevant month. Here, only (e) is in dispute.

39.I reject Mr Toms’ submission that Mr Seto “admitted” under cross-examination that the Defendant gave notice “in accordance with the residential lease contract”. First, although Mr Seto did agree it was so written in the NTQ, the whole tenor of his evidence was that he considered the NTQ invalid given the references therein to (a) the Defendant’s intention to move out after 2 months and (b) her last day of occupancy on 10^th April 2006, which is also supported by an objective reading of the 15/2/06 Letter (see paragraph 31 above), and which did not sit well at all with a Break Date of 30^th April 2006 (see paragraph 33 above).

40.Secondly, Mannai Investment Co Ltd made it quite clear that Mr Seto’s subjective views were irrelevant in construing the NTQ. Lord Clyde at p.782 said “[the] test is an objective one …… in general the actual understanding of the parties is beside the point”. By the same token, I also do not rely on the Defendant’s claim that she did not know the Tenancy Agreement could only be determined on the last day of the relevant month and not on 10^th April 2006 when she issued the NTQ, and that she only realised this when she received the 15/2/06 Letter, which assertions plainly showed she never intended the notice period in the NTQ to expire on 30^th April 2006.

41.Mr Toms next submitted that the basic purpose of the Notice Precondition (ie to inform the Plaintiff that the Defendant has decided to exercise the break option to determine the Tenancy Agreement) was achieved by the NTQ since the Plaintiff would have understood it to mean (a) the Defendant wanted to terminate the Tenancy Agreement and (b) she might do so in accordance with the Notice Precondition on 30^th April 2006.

42.In my judgment, applying the objective approach to construction discussed in the authorities and crediting the proverbial reasonable landlord with knowledge of the terms of the Tenancy Agreement, he would not have understood the NTQ (when read as a whole) to unambiguously convey a decision to break the Tenancy Agreement on 30^th April 2006. On a fair and reasonable view, given that the NTQ referred to a single Break Date, 10^th April 2006 as mentioned therein could not be ignored as immaterial or non-misleading in the context of the nature/purpose of the notice (see also paragraph 33 above).

43.The present case can be distinguished from Mannai Investment Co Ltd. First, Lord Clyde noted that the break notice in that case proclaimed at the outset it was given “pursuant to clause 7(13)”. He said at p.782 that “[this] was a precise reference to the particular provision under which the notices were being sent, as distinct from some general reference to the agreement between the parties”. Having so invoked the break clause specifically, the landlord was expected to know the terms thereof and the date on which the lease fell to be determined under that clause. Here, there was only a broad reference in the NTQ to the Tenancy Agreement without any mention of Clause 7.

44.But even if the particular break clause were mentioned, Lord Steyn at p.773 warned it would go too far to say “whenever a notice to determine refers to a break clause, and whatever the other circumstances of the case, the notice must be valid”. In Mannai Investment Co Ltd, Lord Clyde said at p.782 that “[the] close proximity of the 13^th [to 12^th January 1995] makes it the more evident that it was erroneous and that the date intended was the date which the parties had agreed for a determination of the tenancy under clause 7(13)”. But here, notwithstanding the broad reference to the Tenancy Agreement, a reasonable recipient with knowledge of the terms of the Tenancy Agreement and approaching the matter objectively would have understood that the Defendant intended to give 2 calendar months’ notice in the NTQ, which was why she said she would move out after 2 months and would last occupy the Premises on 10^th April 2006 (see paragraph 33 above). In the words of Lord Steyn, a reasonable recipient would have been “perplexed” by the NTQ, and could not say without ambiguity that the Defendant was relying on 30^th and not 10^th April 2006 as the Break Date. For reasons discussed above, the broad reference to the Tenancy Agreement was insufficient to overcome such ambiguity or militate against her stated intention to relinquish the Premises after 2 months (ie on 10^th April 2006).

45.Mr Toms next argued that the Plaintiff was not misled by the NTQ because the Plaintiff even alerted the Defendant of her “miscalculation” over the Break Date (which should be 30^th April 2006) in the 15/2/06 Letter. Insofar as such argument relies on the Plaintiff’s subjective understanding, it is irrelevant for construing the NTQ. Even if otherwise (which I disagree), at best it showed the NTQ was perplexingly ambiguous, and in response to such confusion the Plaintiff by the 15/2/06 Letter sought confirmation from the Defendant as to whether instead of “notifying [the Plaintiff] of her intention of moving out of the [Premises] on 10^th April 2006” she would rely on 30^th April 2006 as the operative Break Date. As the Defendant put it in her witness statement, “[in] summary what we have is a situation where [she] gave notice of termination of the Tenancy, the landlord reverted by advising that the date [she] had mentioned was incorrect and proposed a different date ……”

46.In my view, unless the Defendant adopted the “different date” referred to by the Plaintiff, there was no valid Break Notice under Clause 7. The decision in Mannai Investment Co Ltd was that on a true construction the notice therein communicated information which the break clause required and therefore there was compliance with the contractual requirement. But the decision does not support the idea that anything less than full compliance with the contractual requirement will be sufficient to break the tenancy. I am not satisfied the ambiguity referred to above could be cured by interpretation.

VIII. April Charges and April Fixture Charges

47.On 1^st April 2006, the Plaintiff issued a debit note to the Defendant demanding payment of the April Charges and April Fixture Charges in the total sum of HK$17,066.50.

IX. Validating the NTQ?

(a) Background facts

48. The Defendant thought it unfortunate that she would have to pay extra if the Break Date were postponed from 10^th to 30^th April 2006, but to avoid argument she eventually sent the 15/3/06 Letter to the Plaintiff inter alia as follows :

“I have received your letter regarding the last date of tenancy.

I hereby confirm that I acknowledge that the tenancy agreement will be ceased as of the last day of April, 2006.”

49.On 18^th April 2006, the Plaintiff replied to the Defendant (“18/4/06 Letter”) as follows :

“We refer to [the 15/3/06 Letter] thereby giving us notice of the termination of the Tenancy Agreement …… in respect of the above Premises and shall be obliged if you will fix a time with our building supervisor, Mr. Seto, for the customary “marching out” inspection.”

50.On 29^th April 2006, the Plaintiff sent the following letter dated 28^th April 2006 (“28/4/06 Letter”) to the Defendant by registered post :

“With reference to [the 18/4/06 Letter] requesting you to fix a time with us for the customary “marching out” inspection of [the Premises], the Tenancy Agreement of which you intended to terminate on the last day of April 2006 as stated in [the 15/3/06 Letter], up to the writing of this letter, we do not appear to have the favour of your reply.

Accordingly, we would like to inform you that unless we shall receive back [the Premises] from you on the last day of April 2006, after the joint “marching-out” inspection to ascertain that [the Premises] are being yielded up in good and substantial repair, the Tenancy Agreement …… in respect of [the Premises] shall still be in force.

Incidentally, please be reminded that you have not yet settled your outstanding accounts with us and an overdue interest at the rate of 2.5% per month will be charged against outstanding balance after one month from the debit note date.”

(b) Vacating the Premises

51. The Defendant claimed she vacated the Premises on 21^st April 2006 and started a new tenancy elsewhere between 21^st and 30^th April 2006. She claimed (without mention in her witness statement) that Mr Seto’s female assistant saw her vacate the Premises on 21^st April 2006. The Defendant did not know such assistant’s scope of duties (except having seen her do cleaning work), but when she first rented the Premises she had seen Mr Seto give instructions to such assistant. On balance I find the evidence fell short of establishing such so-called assistant as Mr Seto’s assistant in carrying out building supervision duties.

52.I reject any suggestion that prior to 30^th April 2006 the Plaintiff knew the Defendant had vacated the Premises. Under cross-examination, the Defendant admitted (a) she did not tell the Plaintiff the exact date she actually vacated the Premises, and (b) the so-called assistant might not have sufficient authority to acknowledge her departure from the Premises on behalf of the Plaintiff. It is telling to note that the Defendant also gave evidence variously that (i) she first informed the Plaintiff she had vacated the Premises on 21^st April 2006 in her letter to the Plaintiff dated 29^th April 2006 (“29/4/06 Letter”, see paragraph 138 below), (ii) she had already told Mr Seto the same during the earlier 28/4/06 Tel Call, and (iii) she could not recall whether she told Mr Seto she had vacated the Premises. I find such wavering and uncertain evidence unconvincing.

53. In the circumstances, although I accept on balance the Defendant moved out of the Premises on 21^st April 2006, I prefer Mr Seto’s clear evidence that the Plaintiff was unaware of such fact.

54. The Defendant claimed that during the 28/4/06 Tel Call with Mr Seto on 28^th April 2006 they arranged an Inspection of the Premises for the following afternoon to be attended by the Helper on the Defendant’s behalf since she would not be able to attend. The Defendant explained that the 28/4/06 Tel Call only took place on 28^th April 2006 because (a) she had been busy moving into her new leased residence, and (b) “since the agreed date was the end of April [she] thought so long as the [Inspection] took place before the end of April [she] felt there was no rush”.

55. The Defendant claimed under cross-examination that she tried to telephone Mr Seto before and after 21^st April 2006 (“Attempted Calls”), but could not get hold of him prior to the 28/4/06 Tel Call. She said she had left her name/address with the lady who took the Attempted Calls, but neither Mr Seto nor anyone else on behalf of the Plaintiff returned call. But the Attempted Calls did not sit well with the Defendant’s evidence of there being no rush in the above paragraph. Further, there was no reference to the Attempted Calls in the contemporaneous correspondence or witness statements.

56.The Defendant claimed it was unnecessary to mention the Attempted Calls in her witness statement because (a) they were merely causal contacts with a view to tell Mr Seto the Helper would attend the Inspection of the Premises on her behalf, and (b) there was no particular issue between the parties (ie she did not think the 28/4/06 Tel Call would be disputed). I find such explanation unpersuasive.

57.First, even on the Defendant’s case, the Inspection, which was not yet arranged when she made the Attempted Calls, could have taken place any time between 21^st and 30^th April 2006. Given her evidence that she (a) had moved out of the Premises on 21^st April 2006, (b) would attend such Inspection herself if she could, and (c) was actually in Hong Kong from 21^st to 28^th April 2008 inclusive, I find it strange that she was already minded to tell Mr Seto that the Helper would attend the Inspection on her behalf when she made the Attempted Calls.

58. Secondly, I reject the Defendant’s suggestion that there was no particular issue between the parties. By the time she prepared her witness statement, there was already debate in the pleadings as to whether there was any 28/4/06 Tel Call. Indeed, she said in evidence she knew and was surprised by the Plaintiff’s denial of the 28/4/06 Tel Call.

59. Upon further cross-examination by Ms Man, the Defendant agreed she simply thought it sufficient to mention the 28/4/06 Tel Call and not the Attempted Calls in her witness statement. But the contemporaneous 28/4/06 Letter clearly refuted the existence of the Attempted Calls and 28/4/06 Tel Call by stating that up to the time of writing such letter the Defendant had not replied to the Plaintiff’s request in the 18/4/06 Letter for fixing an appointment for an Inspection of the Premises.

60. More importantly, if the 28/4/06 Tel Call did occur, there would have been no reason for Mr Seto to (a) deny such telephone conversation, (b) go to the Post Office in the morning of 29^th April 2006 to mail the 28/4/06 Letter, and (c) behave as he did when the Helper came to see him on 29^th April 2006 (“29/4/06 Meeting”). After all, even on the Plaintiff’s own case, the 28/4/06 Tel Call was sufficient acceptance by the Defendant of the Inspection Precondition.

61.Still further, although the 29/4/06 Letter (see paragraph 138 below) was to record the Defendant’s dispatch of the Helper to attend an Inspection of the Premises and to return the Keys to Mr Seto on 29^th April 2006, it made no mention of the Attempted Calls and/or the 28/4/06 Tel Call. Whilst the Defendant did not think these matters irrelevant, she claimed it was unnecessary to mention them in the 29/4/06 Letter because (a) “it was something that Mr Seto have agreed on the phone and [she] thought it would be honoured”, and (b) she expected Mr Seto would have informed the Plaintiff of the agreed arrangements. I find her explanation implausible especially when she claimed she wrote the 29/4/06 Letter in Japan in the evening of 29^th April 2006 right after the Helper reported to her by telephone about the 29/4/06 Meeting. On the Defendant’s case, it would have been obvious by then that her understanding and agreed arrangements with Mr Seto over the 28/4/06 Tel Call had not been honoured at the 29/4/06 Meeting, and such about-face should have attracted vigorous complaint in the 29/4/06 Letter against what Mr Toms described as Mr Seto’s unreasonable behaviour. In my view, the silence in the 29/4/06 Letter on the Attempted Calls and/or the 28/4/06 Tel Call is deafening.

62. I disagree with Mr Toms’ submissions that whether there was the 28/4/06 Tel Call was irrelevant. Whilst I accept there was no contractual requirement for an Inspection of the Premises or for the Defendant to attend such Inspection in person, it was very much the Defendant’s case that she actually agreed to the Plaintiff’s request for a “customary” Inspection of the Premises over the 28/4/06 Tel Call, which led to her contention that notwithstanding Mr Seto’s unreasonable behaviour at the 29/4/06 Meeting she had through the Helper delivered/ yielded up vacant possession of the Premises to the Plaintiff on that day. I cannot say the findings of fact in respect of the 28/4/06 Tel Call irrelevant.

63.On balance I prefer Mr Seto’s evidence that there was no prior arrangement between the parties for any joint Inspection of the Premises to take place on 29^th April 2006 and/or for the Helper to attend such Inspection on behalf of the Defendant. Such findings adversely affect the overall credibility/reliability of the Defendant’s evidence.

(d) Plaintiff’s case

64.The Plaintiff claimed that for the NTQ to validly expire at the end of the relevant month (ie 30^th April 2006) the Defendant must give proper confirmation as requested in the 15/2/06 Letter before the end of February 2006. The Plaintiff further claimed that a confirmation given after such deadline would fail to validate the NTQ and could not of itself stand as a valid Break Notice.

65.But the Defendant’s confirmation by the 15/3/06 Letter came after the end of February 2006. About a month later, the Plaintiff was concerned there was still no proper confirmation of the NTQ, so it sent the 18/4/06 Letterto the Defendant offering to waive irregularity of the notice period in the NTQ and to acknowledge 30^th April 2006 as the operative Break Date on condition that the Defendant would accept and fulfil the Inspection Precondition. No response was forthcoming from the Defendant.

(e) Defendant’s case

66. The Defendant claimed the Plaintiff never objected to or questioned the validity of the NTQ. After the Plaintiff corrected the Break Date in the NTQ by the 15/2/06 Letter, the Defendant by the 15/3/06 Letter acknowledged 30^th April 2006 as the new Break Date. As the Defendant did not hear from the Plaintiff for a further 5 weeks, she assumed the Plaintiff agreed to such new Break Date. Indeed, when the Plaintiff reverted by the 18/4/06 Letter, by referring to the Defendant giving a Break Notice and requesting the Defendant to fix a time with Mr Seto for “customary” Inspection of the Premises, the Plaintiff confirmed the Defendant’s understanding/belief that the agreed Break Date was 30^th April 2006.

67.The Defendant argued that if the Break Notice were invalid and/or if the Tenancy Agreement would not have determined on 30^th April 2006, an Inspection of the Premises would not have served any purpose, and she would have sought legal advice and/or issued a fresh Break Notice instead. However, by the time of the 28/4/06 Letter, both parties were working on the mutually agreed Break Date of 30^th April 2006.

68.Mr Toms submitted that since the Defendant relied on a mutual assumption of facts or law that the Break Notice was valid or being treated as valid by the Plaintiff “and the Tenancy would terminate on the last day of April 2006”, an estoppel by convention and/or a proprietary estoppel arose, and the Plaintiff was estopped from denying the validity of the Break Notice. He argued it would have been unjust for the Plaintiff to go back on such mutual assumption because it was on the basis of such assumption that the Defendant did not issue any fresh Break Notice and instead organised the Helper to attend the Inspection of the Premises on 29^th April 2006 as arranged with Mr Seto.

(f) Principleson estoppel

69.The elements for establishing estoppel by convention were succinctly summarised in the headnote of the Court of Final Appeal decision in Unruh v Seeberger [2007] 2 HKLRD 414 as follows :

“(9) The elements of an estoppel by convention were, first, the parties entering into some “transaction” or legal relationship on the basis of an assumption that was shared by or common to them both. Second, an attempt by one party to depart from the common assumption which departure would be unjust because of the part taken by him in occasioning its adoption by the other party. Third that the other party would suffer detriment arising out of his having entered into the relevant transaction on the basis of the common assumption if the opposite party were afterwards allowed to set up rights inconsistent with the assumption ……

(10)   As far as the common assumption was concerned:

(a)    It must be communicated between the parties and acted upon. But there was no necessity for the parties or either of them to believe that the assumed state of affairs was true. What was important was for them to act in the belief, manifested by words or conduct, that they were both proceeding with the transaction on the basis of the same shared assumption ……

(b)   Its content must be sufficiently certain to enable the court to give effect to it ……

(c)    The common assumption could be an assumed state of facts or law ……”

70. As regards proprietary estoppel, Ribeiro PJ in Unruh at p.456 cited Justice K R Handley, Estoppel by Conduct and Election (2006) as follows :

“…… Proprietary estoppel by encouragement enforces proprietary expectations which the person estopped has created or encouraged when their repudiation would be unconscionable. Proprietary estoppel by standing by enforces an equity against the fraud of an owner who seeks to rely on his property rights to profit from the known mistake of another. ……”

71. I cannot see how any argument on estoppel in relation to the notice period or Break Date of the Break Notice relates to “encouragement” by the Plaintiff (whether by conduct or representation) from which a promise to the Defendant could be inferred to the effect that the Defendant had a legally enforceable interest in land or that one would be created in her favour (see Chitty on Contracts 29^th ed, Vol.1 (2004) para.3-138 at p.301). In the circumstances, I need say no more on the Defendant’s arguments on proprietary estoppel, which I reject.

(g) Waiver of irregularity of the notice period of the NTQ

72.Although the Defendant pleaded waiver of irregularity of the notice period in the NTQ, such argument did not feature in Mr Toms’ written opening and/or closing submissions.

(h) Analysis

73. A reasonable landlord would have recognised the NTQ as an attempt by the Defendant to give a Break Notice, but would have been confused over the operative Break Date. In face of such confusion, the Plaintiff sent the 15/2/06 Letter to invite clarification and confirmation of the Break Date without specifying any reply deadline. In my view, the initially invalid NTQ was validated by the Defendant’s confirmation of the new Break Date of 30^th April 2006 in the 15/3/06 Letter.

74.A reasonable recipient reading the 15/3/06 Letter objectively would not have regarded such letter of itself to be a Break Notice. Rather, he would have understood it was to feed/supply the correct and/oroperative Break Date to validate the NTQ already served before the end of February 2006 and to regularise the notice period specified therein. Although Mr Seto subjectively thought the Defendant’s confirmation should be given before March 2006, the wording of the 15/2/06 Letter read pursuant to the objective approach endorsed by Mannai Investment Co Ltd did not reflect such subjective view.

75. The Plaintiff argued that its request for a “customary” Inspection of the Premises was a precondition for waiving irregularity of the notice period in the NTQ. Even though such Inspection was not a contractual requirement or precondition, if there were any irregularity of the notice period in the NTQ (which rendered the NTQ invalid), it would have been open to the Plaintiff to waive such irregularity on terms. But on a fair and reasonable reading of the 18/4/06 Letter, I am unable to accept the Plaintiff’s subjective stance of having imposedthe Inspection Precondition. To put it simply, there is no plain and obvious wording in the 18/4/06 Letter to such effect. In my view, the Plaintiff merely requested a non-contractual “customary” Inspection of the Premises.

76.Without any previous attempt to determine the Tenancy Agreement, there was no such custom between the parties. Mr Seto said “customary” Inspection in fact referred to the usual practice of carrying out joint marching-out Inspections of leased premises upon determination of tenancies between (a) the Plaintiff and its tenants and (b) landlords and tenants generally in Hong Kong. Such “customary” Inspection enabled a landlord to check whether vacant possession and fixtures/chattels were properly delivered/yielded up and whether the premises were in an acceptable state/condition. I find on balance it was the Plaintiff’s practice to request “customary” Inspections upon determination of tenancies vis-à-vis its leased properties, and the 18/4/06 Letter was merely referring to such “customary” Inspection.

77.Further, unlike the Performance Precondition discussed below, whether the Notice Precondition was fulfilled could be readily ascertained from a perusal of the NTQ together with the 15/3/06 Letter. There is, therefore, force in the argument that in acknowledging the Defendant gave notice to terminate the Tenancy Agreement and then going on to request her to fix an appointment for a “customary” Inspection of the Premises, the Plaintiff in the 18/4/06 Letter assumed the NTQ as confirmed by the 15/3/06 Letter was valid.

78. In the circumstances, it is unnecessary to consider the Defendant’s arguments on estoppel and/or waiver. But if necessary, based on the above analysis/findings, I find that at the latest by the 18/4/06 Letter both parties mutually assumed the NTQ had been confirmed as valid and the new expiry date of the notice period was 30^th April 2006. Since there was detrimental reliance on such common assumption by the Defendant in not issuing any fresh Break Notice, the Plaintiff was estopped from denying such assumption.

X. PerformancePrecondition

(a) Condition precedent

79.It is necessary to start with construction of the Performance Precondition which required the Defendant to pay all rents and perform/observe all stipulations and conditions contained in the Tenancy Agreement up to the time of determination thereof. Whilst the court on an objective approach strives to give effect to what the parties intended for a particular provision, it also bears in mind authorities that give a general guide on how courts have approached such provision, and the nearer to the form of words used the more compelling the authority.

80. In my view, the obligations under the Notice Precondition and Performance Precondition were concurrent/double conditions precedent, so the Defendant must fulfil both to determine the Tenancy Agreement (see the phrase “then and in such case the Tenancy Agreement shall determine” in Clause 7).

81.Neither Ms Man nor Mr Toms cited any authority in this respect, but a review of the relevant authorities shows that with all other things being equal the Performance Precondition would be construed as a condition precedent (see Finch v Underwood [1876] 2 Ch 310, Stait v Fenner [1912] 2 Ch 504, Simons v Associated Furnishers Ltd [1931] 1 Ch 379, United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904, Bass Holdings Ltd v Morton Music Ltd [1988] 1 Ch 493 and Mannai Investment Co Ltd at p.773G per Lord Hoffmann).

82.Further, in my view, the form of words used in the Performance Precondition (ie “…… on [the Defendant’s] part to be performed and observed up to such determination [of the Tenancy Agreement]”) meant that compliance was required as at the operative Break Date of 30^th April 2006 and not when the Break Notice was given. So even if there were no punctual compliance of the Defendant’s obligations under the Tenancy Agreement, it would not have mattered if she performed and observed such obligations by the operative Break Date of 30^th April 2006 (see Starkey v Barton [1909] 1 Ch 284 where an option to purchase subject to rent being duly paid was held not to mean that payment of rent necessarily had to have been punctual).

83.Mr Toms did not challenge the status of the Performance Precondition as a condition precedent, but it is still useful to understand the rationale for such construction as explained in Bass Holdings Ltd. In that case, the tenant had the option to take a further lease on giving written notice of its desire “if it shall have …… performed and observed the several stipulations on its part to be performed and observed up to the date of [the notice]”. Kerr LJ reviewed the authorities and at p.518 summarised the relevant propositions inter alia as follows :

“(1) The first question is whether, on the true construction of the proviso in question, the absence of any material breaches of covenant by the defendants is a condition precedent to the exercise of the option.

Generally, and admittedly in the present case, the proviso contains a double condition precedent, viz., (i) the absence of any material breaches of covenants and (ii) compliance with the requirement as to notice.

(2) That, however, leaves the crucial question whether the condition precedent (i), that there must be no material breaches of covenant by the defendants, applies to spent as well as subsisting breaches. …… The upshot of these authorities is that spent breaches will not destroy the tenant’s right to exercise the option, but subsisting breaches will. …… the reasoning is in effect as follows. First, it must be accepted that absolute and precise compliance by the tenant with every single covenant throughout the period of the lease prior to the operative date is virtually impossible of attainment. If this were required as a condition precedent, then the option would in practice be worthless or merely at the mercy of the landlord. Therefore the parties cannot have intended that the absence of spent breaches should be a condition precedent. Secondly, however, it is natural and sensible that the landlord should require the tenant not to be in breach of any covenant on the operative date and that all outstanding claims for breach of covenant should have been previously satisfied, so that the lease is then effectively clear. The proviso is therefore to be construed as intended to be apply to subsisting breaches, with the result that the relevant condition precedent is the absence of any subsisting breach. ……”

84. Likewise in the present context, I am of the view that the commercial purpose of the Performance Precondition was to ensure that before the Defendant could take advantage of the break option in Clause 7 to depart from and cease to be a tenant of the Premises, all tenant obligations must be observed and performed (so that the Plaintiff could re-let or sell the Premises without delay or additional expenditure) and all rent and other sums due and payable under the Tenancy Agreement must be paid (because the Plaintiff as landlord could no longer distrain) at the break of the Tenancy Agreement without the Plaintiff having to resort to uncertain litigation against the Defendant after she was gone from the Premises.

85.So strictly on the Performance Precondition, irrespective whether the Defendant paid the April Charges on 1^st April 2006 or not, she was required to pay the same and deliver/yield up vacant possession of the Premises on or before 30^th April 2006 before the Tenancy Agreement could determine.

(b) Compliance with the PerformancePrecondition?

86.It is common ground that the Defendant did not pay the April Charges and April Fixture Charges on or before 30^th April 2006, and that she only paid the outstanding balance of the same after set-off against the Deposit by the Cheque on 18^th May 2006. But Mr Toms submitted that the Defendant had in fact complied with the Performance Precondition.

87.The Defendant gave evidence that she did not pay the April Charges because she (a) was waiting for an Inspection of the Premises to take place before 30^th April 2006, (b) thought the April Charges would be set-off against the Deposit, and (c) assumed that if she were required to make further payment she would do so in one go after such Inspection and set-off against the Deposit.

88.Yet the Defendant was admittedly aware of her obligation to pay the April Charges “without deduction” on the first day of each month (ie such payment was not dependent on any Inspection of the Premises), and that Clause 4(g) only required the Plaintiff to refund the Deposit upon the expiry or sooner determination of the Tenancy. Such awareness did not sit well with her explanations in the above paragraph, which on balance I reject.

89.The Defendant was thus constrained to say that her failure to pay the April Charges was based on convenience in making payment in one go. But she attempted to bolster such assertion by relying on (a) her experience with 2 previous landlords who had allowed her to set-off rent payable for the last month or so against the security deposit, and (b) hearsay from friends that this was a common practice. But these matters were not alluded to in her witness statement at all.

90.In any event, none of these explanations can assist the Defendant since it is inappropriate to rely on her subjective intentions/ considerations (to which the Plaintiff was not privy) in determining whether there was compliance with the Performance Precondition. The undeniable objective fact is that the Defendant failed to pay the April Charges on or before 30^th April 2006 for her own reasons (see also paragraphs 102-104 below).

91.Mr Toms argued that had Mr Seto allowed the Inspection of the Premises to go ahead on 29^th April 2006 instead of unreasonably refusing such Inspection and/or declining to take the envelop containing 2 sets of the Keys and the Defendant’s handwritten note (“Note”) as follows from the Helper at the 29/4/06 Meeting :

“Due to my business travel, I won’t be able to be present at the inspection. I asked my helper to drop off the keys, please go in without my presence to conduct the inspection.”

the “netting-off” against the Deposit (and hence payment of the outstanding rent) would have taken place on that same day, and there would have been compliance with the Performance Precondition in that all rents would have been paid. Mr Toms submitted that the Plaintiff could not rely on Mr Seto’s unreasonable behaviour (which precluded the “netting-off’ from happening before 30^th April 2006) to say that the rent for the month of April 2006 was not paid and therefore it would rely on the strict provisions of the Performance Precondition.

92.In my view, the above submissions erroneously assumed that the Performance Precondition merely required payment of the outstanding rent for the month of April 2006 in the sum of HK$15,000.00. In fact, such precondition also required the Defendant to “perform and observe all stipulations and conditions contained in the Tenancy Agreement and on her part to be performed and observed up to such determination”, so she should have paid the other April Charges being the subject of the Plaintiff’s debit note dated 1^st April 2006 on or before 30^th April 2006. In such circumstances, even assuming that a set-off against the Deposit could have been effected on or before 30^th April 2006, a sum of HK$1,366.50 would still be outstanding and unpaid as at 30^th April 2006.

93.It was the Defendant’s case that she planned to pay in one go after Inspection of the Premises on 29^th April 2006. With the Defendant being out of Hong Kong between 29^th April 2006 and early May 2006, and no evidence that she made any prior arrangements to pay such sum of HK$1,366.50 on or before 30^th April 2006, I find on balance that she intended to pay any outstanding sum only after expiry of the Break Date of 30^th April 2006, which meant she would not have been able to satisfy the Performance Precondition even on her own case.

94.I will consider the issues in relation to the 29/4/06 Meeting 2006 below. Suffice to say here that my findings do not aid Mr Toms’ submissions that the Defendant had complied with Performance Precondition. It is also interesting to note that in the correspondence between the parties, the Defendant only raised the matter of outstanding rent for the first time in the 29/4/06 Letter that was posted after the Break Date in early May 2006 (see paragraph 138 below). It is even more telling that in such letter the Defendant said she would settle the outstanding rent “once [the Plaintiff] allow [her] to have [her] authorized delegate to conduct the inspection”, which is quite different from the Performance Precondition which required the April Charges to be paid before the Break Date of 30^th April 2006. Further, the 29/4/06 Letter did not mention any intention to set-off any outstanding rent against the Deposit.

(c) Estoppel and/or waiver of the PerformancePrecondition?

(1) Principles on waiver

95.There is no dispute that the elements common to all forms of waiver are (a) an unequivocal representation by X either by words or conduct that he will forgo certain rights, and (b) X makes that representation when he is aware of the facts that give rise to the rights which are being foregone, of the right to forgo those rights and the connection between the two (see Wilken and Villiers, The Law of Waiver, Variation and Estoppel para.4.45 at p.68).

96.Wilken and Villiers, paras.509-5.12 at pp.74-75 also stated there must be a link between the conduct relied on and the alleged defective performance. If Y acts in a way that is patently at odds with the terms of the contract and X responds to that behaviour otherwise than by stating that the behaviour is in breach of the contract, a waiver will be made out. But it is unlikely (other than in extreme cases) that X’s silence, inaction, failure to act or the mere lapse of time will amount to unequivocal representation.

(2) Defendant’s arguments

97.On the waiver argument, Mr Toms submitted that the Defendant’s failure to pay rent on the due date under clause 2(a) of the Tenancy Agreement was “patently at odds with the terms of the contract”, yet the Plaintiff did not respond by stating such behaviour was a breach of contract that would have prevented determination of the Tenancy Agreement under Clause 7.

98.On the argument of estoppel by convention, Mr Toms submitted that both parties were acting on an assumed state of facts or law, ie (a) the Break Notice was valid or being treated as valid by the Plaintiff and (b) notwithstanding the Defendant’s lateness in paying rent the Tenancy Agreement would nevertheless have determined on 30^th April 2006.

99.Mr Toms submitted that both parties acted positively as if the Tenancy Agreement would still have determined on 30^th April 2006, and in particular the Plaintiff :

(a) never sought to rely on the strict terms of the Performance Precondition;

(b) still proceeded on the basis that the Tenancy would have determined on 30^th April 2006 notwithstanding that the Defendant did not pay rent due on 1^st April 2006;

(c) by the 18/4/06 Letter still sought to organise an Inspection of the Premises notwithstanding that the Defendant did not pay rent due on 1^st April 2006;

(d) by the 28/4/06 Letter indicated that “unless [the Plaintiff] receive back the [Premises] from [the Defendant] on the last day of April 2006, after the joint marching-out inspection ……, the [Tenancy Agreement] in respect of the [Premises] shall still be in force”, and further made reference to the outstanding rent but only indicated interest would be charged thereon at the rate of 2.5% per month, without asserting that the Tenancy Agreement would not have determined by reason of the late payment of rent.

100.So it was argued that waiver of strict compliance of the Performance Precondition was therefore made out, and that the above acts were entirely inconsistent with (a) a mutually assumed state of facts or law as set out in paragraph 98 above and/or (b) the suggestion that the Plaintiff was intending to rely on the strict terms of the Performance Precondition.

101.Mr Toms submitted it would have been unjust to allow the Plaintiff to go back on such mutual assumption because the Defendant (a) did not pay rent in advance and then seek repayment of the Deposit after termination of the Tenancy Agreement and (b) organised the Helper to attend the Inspection of the Premises on 29^th April 2008 on the basis of such mutual assumption.

(3) Analysis

102.In my view, Ms Man was right in saying that the Defendant’s contentions faced a formidable evidential hurdle. I have rejected the Defendant’s explanation for failing to pay the April Charges in paragraph 87 above, and her thin explanation in paragraph 89 above is unconvincing. On balance I am persuaded she knew without being told by the Plaintiff that she was contractually obliged to pay the April Charges when due as evident from the terms of the Tenancy Agreement as well as from the Plaintiff’s debit note dated 1^st April 2006 which she received. I further find that she chose not to pay the April Charges on or before 30^th April 2006 for her own subjective reasons that had nothing to do with the Plaintiff.

103. I turn first to the Defendant’s evidence. She admitted she did not regard the Plaintiff as having (a) expressly permitted the outstanding rent for the month of April 2006 to be set-off against the Deposit, (b) done anything whether by way of representation/conduct that would have led her to believe she was not required to pay the April Charges on or before the operative Break Date of 30^th April 2006, and/or (c) granted her any time indulgence for payment of the April Charges. At best, the Defendant just assumed the Plaintiff might (but not necessarily would) have been prepared to agree to the above.

104. The Defendant never raised the issue of payment of outstanding rent until the 29/4/06 Letter (which was posted in early May 2006 after the Break Date of 30^th April 2006 – see paragraph 138 below), so she agreed the Plaintiff could not have foreseen she would not pay the April Charges on or before 30^th April 2006. In the end, the Defendant was constrained to say the Plaintiff never permitted payment of the April Charges after 30^th April 2006, and confessed “[she] never said that the landlord has given [her] a waiver” of strict compliance of the Performance Precondition.

105.The Defendant next claimed that at the material time she was subjectively unaware of the requirements of the Performance Precondition, so she thought her non-payment of rent for the month of April 2006 and/or her intention to “net-off” the outstanding rent against the Deposit were unrelated to the determination of the Tenancy Agreement. But such argument is tantamount to saying that the Performance Precondition ceased to be a condition precedent as a result of the Defendant’s subjective understanding (or misunderstanding) of the relevant contractual provision. Subjective intentions and/or considerations have no place in the interpretation of bilateral contractual provisions and their effect.

106.Moreover, the objective construction of the Performance Precondition as a condition precedent (see paragraphs 80-82 above) accorded with Mr Seto’s understanding. So the Defendant’s assumption that the Plaintiff might (but not would) have allowed the April Charges to be set-off against the Deposit because of (a) her own unawareness of the requirements of the Performance Precondition, (b) her own experience with her previous landlords, and (c) hearsay information from her friends was insufficient to (i) constitute any mutually assumed state of facts or law to support any argument based on estoppel by convention or (ii) evidence any unequivocal representation by the Plaintiff to support the waiver argument.

107. The Defendant next complained that the Plaintiff never expressly required her to pay the April Charges first with the Deposit to be refunded only upon determination of the Tenancy Agreement. As a corollary thereto, she also criticised the Plaintiff for never expressly telling her (a) she could not set-off the rent due on 1^st April 2006 against the Deposit or (b) the Tenancy Agreement would not be determined unless she paid such outstanding rent.

108.I note the Plaintiff issued and the Defendant received a debit note for inter alia the April Charges dated 1^st April 2006. There was no evidence that such debit note was ever withdrawn or cancelled. Further, it cannot be said that the Plaintiff was under some duty to alert the Defendant of her obligations under the break clause (including the Performance Precondition) which she herself had sought to operate and when she had never intimated to the Plaintiff that she intended to set-off the outstanding rent for the month of April 2006 against the Deposit and/or not to pay the April Charges on or before 30^th April 2006.

109.Further, whilst failure to punctually pay the April Charges on 1^st April 2006 constituted a breach of the Tenancy Agreement, such breach was not “patently at odds” with the Performance Precondition. As explained in paragraphs 82-85 above, such precondition was not concerned with whether there was punctual payment of rent or any other pre-existing breach of contract, but with whether there was any subsisting breach of the stipulations and conditions that were required to be performed and observed under the Tenancy Agreement as at the operative Break Date of 30^th April 2006. Had the April Charges been paid on/before 30^th April 2006, breach of the requirement for punctual payment would have been spent and would not of itself have prevented determination of the Tenancy Agreement.

110.Against such background and findings, I accept Mr Seto’s evidence that at the time of the 18/4/06 Letter he did not have the Performance Precondition in mind. Indeed, such precondition was not expressly referred to in such letter, and there was no reason to do so given the absence of any suggestion that the Defendant having invoked Clause 7 would not have paid the April Charges by 30^th April 2006.

111.It was next suggested that notwithstanding the overdue April Charges the Plaintiff still proceeded on the basis that the Tenancy Agreement would have determined on 30^th April 2006 as seen from the references in the 18/4/06 and 28/4/06 Letters (which did not refer to any reliance on the Performance Precondition) as set out in paragraph 99(c) and (d) above. The Defendant herself put it more succinctly, ie she claimed she just “thought it was going as planned and [they] agreed on the time frame of the schedules, when [she] was going to move out”.

112.To argue that the above references and/or omissions in the Plaintiff’s correspondence were “patently at odds” with the Defendant’s obligations under the Performance Precondition simply does not follow. Of course the operation of the break clause should be considered in light of the parties’ correspondence, but, in my view, the essential obligation to pay the April Charges on or before the Break Date still stood.

113.Viewing the parties’ correspondence objectively, there is no doubt the Plaintiff had 30^th April 2006 in mind as the operative Break Date for the Break Notice and that the parties were proceeding on the assumption that the break clause would have effect. But that does not mean they proceeded on any mutual assumption that the Tenancy Agreement should have determined in any event.

114.Unlike the Notice Precondition of which compliance could be readily ascertained from the notice to quit and service thereof, when the Plaintiff issued the 18/4/06 and 28/4/06 Letters, it remained to be seen whether the Defendant would pay the April Charges and deliver/yield up vacant possession of the Premises by 30^th April 2006. There was no particular reason to suggest that the Defendant would not do so given they were things entirely within her control and it was she who sought to operate the break clause. Indeed, the Defendant acknowledged in evidence that the Plaintiff would not have known she would withhold payment of the April Charges until after 30^th April 2006. Thus, even though the parties no doubt contemplated and assumed that the break clause would have effect, and it might have done so if (or that would have been the result of) the Defendant complying with the requirements of the Performance Precondition and delivering/yielding up vacant possession of the Premises, it is not correct to say the break clause ought to have effect or it ought to have effect if an Inspection of the Premises had taken place.

115.There was also no good reason to suppose the Plaintiff as landlord would willingly acknowledge the Performance Precondition as a mere contractual term instead of being a condition precedent. Further, there is nothing in the wording or context of the 18/4/06 and 28/4/06 Letters that called for a construction that the Plaintiff was taken to have given up reliance on or have waived the advantage of the strict terms of the Performance Precondition. Indeed, it is noteworthy that the parties’ exchanges made no mention of the Performance Precondition at all. It is not surprising given the express provisions in Clause 7 of the Tenancy Agreement.

116.Hence, to the extent that the estoppel and/or waiver arguments say the Plaintiff’s correspondence had a greater effect, ie the Tenancy Agreement would determine on the operative Break Date despite non-payment of the April Charges, the Defendant was relying on implication. But, in my view, such implication was not necessary or obvious to give efficacious meaning to the Plaintiff’s correspondence, especially when the Plaintiff by the 28/4/06 Letter reminded the Defendant that she had not yet settled her “outstanding accounts with [them]”.

117.I therefore find there was no unequivocal representation, implicit or otherwise, by the Plaintiff that it did not require the Defendant to comply with the Performance Precondition on or before 30^th April 2006. Without any indication that the Defendant would not pay the April Charges by 30^th April 2006, the parties’ conduct/correspondence, including the anticipation of an effective break by 30^th April 2006, was not at odds with the continued operation of the Performance Precondition. There is no waiver by election and likewise any argument founded on estoppel by representation fails.

118.I have also considered Mr Toms’ criticisms of Mr Seto’s evidence in respect of the Performance Precondition, but after careful scrutiny I accept Mr Seto’s evidence that he thought of the overdue April Charges and the Performance Precondition when the end of April 2006 neared, but since the Defendant did not in any way indicate she would not pay the April Charges by 30^th April 2006, the Plaintiff by the 28/4/06 Letter just reminded the Defendant that payment of the April Charges was overdue and she was liable to pay interest on the outstanding account. I further accept Mr Seto’s evidence that it was not correct to say the Plaintiff regarded the Tenancy Agreement would in any event have determined on 30^th April 2006.

(e) Clause 4(i)

119.In the circumstances, it is unnecessary to consider the effect of the non-waiver provision in Clause 4(i). Mr Toms doubted whether Clause 4(i) would have much effect (see also Merry, Hong Kong Tenancy Law, 4^th ed (2003) pp.148-149). But Merry at p.161 also cited Shing Yip Co Ltd v Lai Choi-wan [1978] DCLR 9, 13 where the learned judge suggested it seemed from the non-waiver clause that the parties intended the tenant should not be entitled to set up any waiver argument. Since neither Mr Toms nor Ms Man referred to these authorities, such interesting arguments should properly be resolved in some other case.

(f) Summary on liability issue

120.Since the Defendant failed to satisfy the Performance Precondition, the Tenancy Agreement did not determine by the Break Date on 30^th April 2006 notwithstanding expiry of the notice period pursuant to the Notice Precondition. I will deal with the issue of delivery up of vacant possession of the Premises for completeness because I have taken account the relevant evidence on the subject in assessing overall reliability/credibility of the witnesses.

XI. Delivery up of vacant possession?

121. Mr Seto said that where the Plaintiff and its tenant agreed to and/or arranged a “customary” Inspection of the leased premises, the Plaintiff usually required the individual tenant or representative of the corporate tenant to be present, but the tenant could send an authorised representative by giving appropriate authorisation identifying such representative and cloaking him with necessary authority. I find this commercially sensible for a landlord needs to be assured that his dealings in relation to the leased premises are done with the proper party, ie the tenant.

122.The Defendant’s case was that even though a “customary” Inspection of the Premises was not contractually required, she had in fact arranged with Mr Seto for such “customary” Inspection to be conducted on 29^th April 2006 pursuant to the 28/4/06 Tel Call. She claimed that since she was going on a business trip to Japan on 29^th April 2006, so on 28^th April 2006 she gave the Helper a sealed envelop on which she had written “TAT MING INV. CO., Ltd.” in the centre and “1F, 16 Pokfield Rd” at the top left corner. She also told the Helper she had arranged with Mr Seto to meet the Helper the following afternoon to attend an Inspection of the Premises and to hand back the Keys. The Defendant gave evidence that the sealed envelop contained 2 sets of the Keys and the Note.

123.At one stage, the Defendant claimed she prepared the Note after the 28/4/06 Tel Call. But following Ms Man’s query as to why there was no reference to the 28/4/06 Tel Call in the Note if it were written after such telephone conversation, the Defendant said she was not sure whether she wrote the Note before or after the 28/4/08 Tel Call. She even explained that she was used to multi-tasking all the time, so she could have written the Note before or after the 28/4/08 Tel Call. She admitted that if the Note were written before the 28/4/06 Tel Call and she failed to reach any understanding with the Plaintiff for an Inspection of the Premises over the 28/4/06 Tel Call, she would have to write another note to replace the Note.

124.The Note, as the Defendant agreed, was on its face consistent with there being no 28/4/06 Tel Call at all. I have rejected the 28/4/06 Tel Call, which finding adversely affected the reliability of the Defendant’s evidence in relation to the Note. On balance I do not accept that the Defendant inserted the Note in the envelop she gave to the Helper because of her arrangements with Mr Seto over the 28/4/06 Tel Call. I note there was no righteous complaint by the Defendant in the 29/4/06 Letter (see paragraph 138 below) posted by her in early May 2006 of the Plaintiff’s unreasonable behaviour in refusing to abide by the mutual arrangements for an Inspection of the Premises reached over the 28/4/06 Tel Call. It only referred to her written consent given to the Helper for the “attempt” at an Inspection of the Premises with Mr Seto.

125.I find on balance that although the Defendant well knew she had to pay the April Charges before 30^th April 2006, she had moved out of the Premises on 21^st April 2006 and wished to defer payment of the April Charges until after determination of the Tenancy Agreement and set-off against the Deposit. So even though she was still in Hong Kong for a week before she went on her business trip to Japan, she left it until 28^th April 2006 to unilaterally instruct the Helper to look for Mr Seto the following day (when she was already out of Hong Kong) to “drop off the keys” and to ask the Plaintiff to “go in [the Premises] without [her] presence to conduct the inspection” (see the Note) with a view to put an end to the Tenancy Agreement on her terms instead of in accordance with the provisions of the Tenancy Agreement.

126.There is no dispute that the Helper went to see Mr Seto on 29^th April 2006 (ie the 29/4/06 Meeting) and tried to give the sealed envelop to him. The Helper pressed the doorbell of his office and he came out to meet her. It was the first time the Helper, whom Mr Seto recognised as the Defendant’s domestic helper, came to look for him.

127.Mr Seto gave evidence that the Helper was unable to clearly articulate the reason for her visit, and he had no idea why she came to see him. The Helper handed a sealed envelop similar in shape/size to exhibit D1 to him without explaining its purpose. He took the envelop in his hand, saw it was a blank envelop, and felt there were some objects inside which might have been keys. He asked the Helper in simple English to whom such envelop was addressed, but got no reply. Not knowing the addressee and the actual objects inside the envelop and/or the purpose of the Helper’s visit, he refused to accept the envelop and handed it back to the Helper.

128. Mr Toms submitted that whether such envelop had an addressee and/or address written on it was irrelevant because Mr Seto accepted it was given to him and he took it. I disagree. First, such factual issue, which was hotly debated even in the pleadings, was relevant to the Defendant’s claim that she delivered/yielded up vacant possession of the Premises on 29^th April 2006 and to the overall credibility of the witnesses. Secondly, the available evidence suggest that whilst the Helper did hand the envelop to Mr Seto, he only took it to ascertain to whom it was addressed and when he discovered it was blank he returned it as he did not recognise/accept it was intended for him.

129.Ms Man asked me to prefer Mr Seto’s account of the 29/4/06 Meeting and draw adverse inference against the Defendant’s case (iethat Mr Seto unreasonably refused the pre-arranged Inspection of the Premises and delivery of the Keys (and therefore vacant possession of the Premises) on 29^th April 2006) because the Defendant deliberately failed to call the Helper to give evidence.

130.Neither Ms Man nor Mr Toms referred to the relevant principles. I refer to Wisniewski (a minor) v Central Manchester Health Authority [1998] Lloyd’s Rep Med 223 in which Brooke LJ analysed the various cases and derived the following principles :

“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in the action.

(2) If a court is willing to draw such inferences they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4) If the reason for the witness’ absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

131.In my view, the Plaintiff has established a prima facie case in relation to the condition of the sealed envelop and what happened at the 29/4/06 Meeting. The Helper (who had worked for the Defendant for 3½ to 4 years, and was still working for her at the time of trial) being the only other person present might be expected to give material first-hand evidence on the Defendant’s instructions to her on 28^th April 2006, the circumstances of the 29/4/06 Meeting and the condition of the envelop on 28^th and 29^th April 2006. There was no practical impediment for the Defendant to call the Helper as witness, yet she claimed it never occurred to her and/or it was unnecessary to do so even though these factual disputes are already evident from the pleadings and she was legally represented throughout the present action. I do not accept the Defendant’s explanations, especially when she agreed the Helper would have been able to give useful evidence on the above-mentioned matters.

132. I am therefore entitled to treat the Helper’s absence as strengthening the Plaintiff’s evidence as set out in paragraphs 126-127 above. But even without drawing such adverse inference, on balance I still prefer and accept Mr Seto’s evidence in relation to the 29/4/06 Meeting.

133. Mr Toms suggested it was specious for Mr Seto to say it did not occur to him on the day before the Break Date that the sealed envelop had something to do with the determination of the Tenancy Agreement. Again I disagree. As I have found, the Helper came out of the blue to see Mr Seto without proper explanation of the purpose of her visit and without prior intimation from the Defendant that she would send the Helper along to attend an Inspection of the Premises and drop off the Keys. Even though Mr Seto frankly admitted he suspected there might have been keys inside the sealed envelop, the envelop was blank without any addressee and, as far as he knew, the Defendant had never responded to the Plaintiff’s proposal in the 18/4/06 and 28/4/06 Letters for a “customary” Inspection of the Premises. In light of the whole factual matrix, including the fact that (a) the April Charges were overdue, (b) the Defendant’s tenant obligations were not yet fully observed/performed, and (c) she never told the Plaintiff she had vacated the Premises, it is not unreasonable for Mr Seto to be wary of doing anything that might be considered as adding credence to the Defendant’s case, eg accepting any blank envelop tendered without proper explanation at the 29/4/06 Meeting. In all the circumstances, I find it unfair to say that Mr Seto rejected a joint Inspection of the Premises.

134.Mr Toms also criticised Mr Seto’s evidence that if a blank envelop were inserted into the Plaintiff’s office letterbox he would have left such blank envelop in the misdirected mail rack instead of opening it. Mr Toms argued that the Plaintiff must have regularly received return of keys from tenants when tenancies came to an end. On balance I accept Mr Seto’s evidence that he never had any actual experience of such hypothetical situation since it was the Plaintiff’s practice to conduct physical Inspection of the leased property together with the tenant or his authorised representative for recovery of vacant possession (and presumably keys) upon determination/expiry of tenancy.

135.Mr Toms submitted that at the 29/4/06 Meeting the Defendant through the Helper delivered/yielded up vacant possession of the Premises pursuant to Clauses 2(r) and 4(d). He argued that since there was no definition in the authorities as to what constituted delivering/ yielding up vacant possession, what the Helper did at the 29/4/06 Meeting was good enough.

136.In my view, whether the tenant in a given case has satisfied his obligation to deliver/yield up possession of the leased premises to the landlord upon determination of the tenancy is a question of fact. So the court has to look at what has occurred objectively and decide whether the tenant has manifested a clear intention to effect a termination, and whether the landlord can, if he wants to, occupy the Premises without difficulty or objection. In my view, an attempt to return the Keys in a sealed blank without proper explanation and without intimation of the existence of the Note inside such envelop was not good enough. Such conduct did not manifest a clear intention to deliver/yield up vacant possession of the Premises.

XII. Post-29/4/06 Meeting events

137.The Defendant claimed she telephoned the Helper from Japan in the same evening after the 29/4/06 Meeting and learnt that Mr Seto refused to accept the sealed envelop or carry out the Inspection of the Premises. The Defendant claimed she was surprised because of the arrangements she had made with Mr Seto over the 28/4/06 Tel Call, which telephone conversation I have rejected and which undermines her evidence as to the events after the 29/4/06 Meeting.

138.I accept the Defendant wrote the 29/4/06 Letter as follows after receiving the Helper’s report as aforesaid :

“Due to my heavy business travel schedule, I have asked my helper to be present at the inspection with [Mr Seto] but he has refused to conduct an inspection. I have given her my written consent so that [Mr Seto] will allow her to be present. Also, the [Tenancy Agreement] did not state that I must be present for this inspection.

As for the outstanding rental, I shall settle once you allow me to have my authorized delegate to conduct the inspection.

Two sets of keys were brought with my helper, but one again, she was told that [Mr Seto] will not accept anything from her even with my written consent, I find this very bizarre as she was helping me.

Please kindly let me know the result and where I can mail the keys for you. For your information, the [Premises] was vacated on the 21^st of April, 2006 and the site inspection was rejected by [Mr Seto] on the 20^th of April 2006 despite the attempt.”

I accept the Defendant’s evidence that she wrote the 29/4/06 Letter prior to her business trip to Japan (which did not sit well with the reference therein to the aborted Inspection of the Premises) was a mistake.

139.The 29/4/06 Letter was posted in early May 2006 (postal chop date was 6^th May 2006) after the Defendant’s return to Hong Kong. Although I disagree that the Defendant prepared the 29/4/06 Letter because it was evident from the Attempted Calls that it was hard to liaise with Mr Seto (since I have rejected the Attempted Calls), I accept it was not unreasonable for her to wait until return to Hong Kong to mail the 29/4/06 Letter. The Defendant claimed she received the 28/4/06 Letter at her office after she posted the 29/4/06 Letter, but she did not take any further action.

140.I find I am unable to place much weight on the Defendant’s complaints in the 29/4/06 Letter which was written after the 29/4/06 Meeting and when she was aware that it would not reach the Plaintiff until after the Break Date. The reference to “[her] written consent” given to the Helper for the “attempt” at Inspection of the Premises is neither here nor there as the Note remained inside the sealed envelop that was returned (in my view reasonably) to the Helper. I further find that the Defendant informed the Plaintiff for the first time she had vacated the Premises by such letter.

141.The Defendant further claimed the Helper returned to her the sealed envelop, which she gave to her solicitors. The effect of the above findings is that the handwritten address and addressee on the sealed envelop being exhibit D1 were written after the 29/4/06 Meeting. Having inspected exhibit D1, I accept (and both Mr Seto and the Defendant agreed) this course was certainly feasible.

142.The balance of the April Charges and April Fixture Charges after set-off against the Deposit was paid by the Cheque on 18^th May 2007. But by that time the NTQ (having expired on 30^th April 2006) was spent, and until expiry of the fresh notice to terminate issued by the Defendant on 18^th May 2006 and payment of the Charges and Fixture Charges until expiry of the fresh notice to terminate, the Tenancy Agreement could not determine and the Deposit was not yet refundable. Indeed, the Charges for the month of May 2006 were by then already due and payable. The Plaintiff refused to accept return of the Keys, and the Tenancy only came to an end by forfeiture on 20^th July 2006.

XIII. Quantum

143.The remaining issue on quantum is whether the Plaintiff was entitled to claim for outstanding Fixture Charges for the period from 1^st May to 31^st July 2006 in the sum of HK$2,100.00.

144. Here, there is no doubt that the Defendant attempted to invoke (albeit unsuccessfully) the break option under Clause 7. Mr Toms submitted that once the Defendant exercised the break option in Clause 7, the Fixture Agreement would pursuant to Clause 4(a) determine “at the expiration of said notice”, ie upon expiry of the notice period of the validated NTQ, and was not dependent on fulfilment of the Performance Precondition. In the circumstances, the Fixture Agreement came to an end on 30^th April 2006.

145.Ms Man referred to Woodfall on Landlord & Tenant para.17.091.2 at pp.17/37-17/38 as follows :

“Although a forfeiture puts an end to the lease, it only does so prospectively from the moment of forfeiture. All claims which have accrued before the forfeiture remain unaffected. In particular, if rent is payable in advance, and a forfeiture takes place after the rent date, but before the end of the period in which the rent was to cover, the rent is payable in full and is not subject to apportionment.”

(see Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433, 442, and Capital and City Holdings Ltd v Dean Warburg Ltd & ors [1989] 1 EGLR 90)

146.I am unable to accept Ms Man’s submissions. The starting point is that the Plaintiff’s claim is limited to arrears of Fixture Charges and not damages for detinue/conversion of the fixtures/chattels after termination of the Fixture Agreement when vacant possession of the Premises were not yet delivered/yielded up. Whilst I have no quarrel with the legal principles referred to in the above paragraph, an objective reading of the termination of the Fixture Agreement (which was a separate contract from the Tenancy Agreement) was not contractually dependent on forfeiture of the Tenancy, but on expiry of a valid Break Notice for early determination of the Tenancy Agreement.

147. Further, the discussion in the above authorities on the relevant moment of determination of the lease in exercising the right of forfeiture was to determine the cut-off point between the landlord’s right to recover (a) arrears of rent under the lease and (b) payments for the occupation of the property (ie mesne profits) by the ex-tenant/trespasser. Such authorities do not assist in determining the Plaintiff’s entitlement to arrears of charges for using fixtures/chattels (albeit within the Premises) under a separate contract with its own express term for early termination.

148.Even though Mr Toms’ argument has not been pleaded, I bear in mind that the Plaintiff still carries the burden to prove its claim on the available evidence. I am not satisfied that the Plaintiff was entitled to the Fixture Charges for the period from 1^st May to 31^st July 2006.

XIV. Conclusion

149.Once shorn of the legal contentions raised by the Defendant against the Plaintiff, the bare fact is that the Defendant wanted to exercise the privilege of early determination of the Tenancy Agreement but was unwilling (and failed) to pay the price of full observation and/or performance of her tenant obligations prior to the Break Date. I therefore enter judgment in favour of the Plaintiff against the Defendant for the sum of HK$46,094.50 being the arrears under the Tenancy Agreement in the sum of HK$45,394.50 (see paragraph 19 above) and the April Fixture Charges of HK$700.00. I also award interest on the sum of HK$46,094.50 at the rate of 8.353% pa from the date of the Writ of Summons to the date of judgment herein, and thereafter at judgment rate until the date of payment.

150.As regards the counterclaim, I dismiss the Defendant’s claim for a declaration that the Tenancy was terminated on 30^th April or 31^st July 2006. The Defendant was not entitled to any set-off against the Deposit until after forfeiture of the Tenancy. In view of the monetary award in favour of the Plaintiff, which took into account the Deposit, it is unnecessary to grant any declaratory relief as requested by the Defendant.

151.There is no reason why costs should not follow event. I grant a costs order nisi that the Defendant do pay to the Plaintiff costs of the action (including costs of the counterclaim and all costs reserved if any) to be taxed if not agreed. Mr Toms did not dispute that certificate for counsel was appropriate, so I grant certificate for counsel for the Plaintiff.

(Marlene Ng)
District Court Judge

Representation:

Ms Phoebe Man instructed by Messrs Danny K H Yue & Co for the Plaintiff.

Mr Jason Toms of Messrs Stephenson, Harwood & Lo for the Defendant.

Cites 3 cases

Cases cited in this judgment

Siegfried Adalbert Unruh v. Hans-joerg Seeberger and Another

Shing Yip Co Ltd v. Lai Choi-wan