Tang Wah Leung t/a Wah Hing Plastic Factory v. Chan Mei Lin

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1221 OF 1970

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BETWEEN

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J U D G M E N T 

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1. In this action the Plaintiff claims for the returns of certain deposits and a sum of $50,000 on the ground of misrepresen­tation. By his Statement ofClaimit is alleged that the Plaintiff paid over $3,500 as deposit for payment of rent and $1,600 deposit for payment of electricity charges under a Chinese agreement dated the 27th April 1969 as a result of the Defendant’s misrepresentation that the land and houses, subject matter of the said agreement, would be used for industrial purposes. It is further alleged that relying on such misrepresentation the Plaintiff spent $9,000 to set up his factory on the land and premises known as Lots No. 2537, 2539 and 2549, Lam Ti New Territories, the subject matter of the said agreement. It is alleged that the said premises were demolished by the District OfficeYuen Long on the 25th November 1969. The Plaintiff claims that before the demolition of the premises he used to earn a net profit of $1,500 per month but since the demolition he has not been able to make this profit but has to spend about $4,500 per month for the maintenance of his regular employees and his machineries. For these reasons, the Plaintiff’s claim is for the deposit money of $5,100 plus the sum of $50,000 as damages.

2. In his defence and counter-claim the Defendant admits that by a Chinese tenancy agreement dated the 27th April 1969the­Defendant let to the Wah Hing Plastic Factory certain portion of three adjoining pieces of land known as Lots Nos. 2532, 2549 and 2583 in D.D. No. 130, Lam Ti New Territories together with twotemporary structures thereon for a termof 80monthscommencing from the 15th of May, 1969 but denies that the said lands and structures were let for industrial purposes. She further states that she never made any representation to the Plaintiff or any other person that the saidland and structures could be used for industrial purposes.

3. There were 88 temporarystructures on the said pieces of land. Towards the end of 1968 the said temporary structures were surveyed by officers of the Resettlement Department and were allocated with numbers indicating the dimensions and permitted mode of user of each of the said structures. The two temporary structures let to the Plaintiff were allocated Nos. SHT/9Bl/753 and SHT/9B1/760 and were marked for use as chicken sheds only. By paragraph 5 of the Statement of Defence it is alleged that:‑

“It was a term of the Chinese Tenancy Agreement that the Wah Hing Plastic Factory may use the said portion of land and structures for proper industrial purposes if such user does not con­travene any Ordinance or Regulations made by the Government of Hong Kong and that the WahHing Plastic Factory should be responsible for all consequence of his user of the said portion of land and structuresfor industrial purposes.”

4. In June 1969 the Defendant noticed that the Wah Hing Plastic Factory, in breach of the terms of the Chinese Tenancy Agreement, was using the said structures asfactory or workshop. The Defendant immediatelywarned the Plaintiff who stated he would make arrangements withthe Government.

5. The Defendant admits that the said temporary structures were demolished by officers of the District Office Yuen Long but claims that such demolition was caused by the misfeasance of the Wah Hing Plastic Factory by misusing the said temporary structures in breach of the terms of the Chinese Tenancy Agreement. The Defendant claims that neither the Plaintiff nor the Wah Hing Plastic Factory is entitled to the return of the $3,500 deposit before the effluxion of time and because of the breach of agreement. Further the Wah Hing Plastic Factory failed to pay electricity charges totalling the sum of $1,546.70 and in fact the deposit of $1,500 only was paid to the Defendant.

6. By way of counter-claim the Defendant sues the Plaintiff and the Wah Hing Plastic Factory for $30,000 being the costs of the two demolished structures, $12,600 being the amount of rent at the rate of $700 per month commencing from the 15th January 1970 to the date of the writ on the ground of breach of the tenancy agreement on the part of the Plaintiff and the Wah Hing Factory.

7. To this defence and counter-claim the Plaintiff files a reply and defence to counterclaim by repeating his Statement of Claim.No defencehas been filed on behalf of the Wah Hing Plastic Factory. The Plaintiff denies liability.

8. Pausingat this stage it will beobserved from the pleadings that both parties rely on the tenancy agreement dated the 27th April 1969. In order to succeed in hisclaim the Plaintiff has to rely on the said tenancy agreement. Similarly, so has the Defendant vis-a-vis his counter-claim.

9. The Plaintiff’s evidence is that on the 21st April 1969 he read in the Sing Tao Daily News an advertisement relating to a factory site for let for industrial purposes. Acting on this information he got in touch with the Defendant’s husband Law Chi. After negotiation he entered into a tenancy agreement with the Defendant on the 27th April 1969. The tenancy agreement is produced as Exh. P.3. The material terms of this agreement are that the Defendant lets to the Plaintiff, Tang Wah Leung, the superstructures as indicated in the planincluding the land on which they are erected for a term of 80 months commencing on the 15th May 1969. By Clause 4 of the said agreement it is provided that :-

“The lessee is to make use of the structures for proper industrial purposes and shall not do anything in contravention of the law or regulations ofthe Government of Hong Kong. All Government matters in connection with or arising from the industry shall be attended to by Party (B) himself …..”

Pausing at this stage I have to observe that there has been some dispute as to the proper translation of Clause 4 in the said Exh. P.3 as produced by the Plaintiff and Exh. D.3, a translation of the same document which was produced by the Defendant. After hearing expert evidence on this matter I have come to the conclusion that the translationascited herein is a more accurate translation.

10. The Plaintiff goes on to say that, acting on the terms of the agreement Exh. P.3, he paid over $3,500 to Defendant as deposit for 5 months rent and another $1,600 as deposit for electricity charges. He produces Exh. P.4 andExh.P.5 the receipts for the respective payments in evidence. He started operating his factory in the structures in May 1969. In August 1969 when officers from the District Office came to investigate he found out that the structureshe rented were permitted only to be used as chicken sheds.Heimmediately informed the Defendant’s husband Law Chi who assured him that formerly he had fixed up the matter with an officer in the New Territories Administration that the place would be used for industrial structures. He says that up to then he had always understood the structures could be so used because he believed in Law Chi, the Defendant’s husband who was the Defendant’s agent in the negotiation; Law Chi then pursuaded the Plaintiff to let him, Law Chi, handle negotiations with the New Territories Administration. As a result the Plaintiff and other factory owners joined Law Chi in a series of petitions to the New Territories Administration as evidenced in Exhs. P.9A P.9C P.9D, P.10A and P.10C. All petitions and requests were rejected and a final warning was given to the Plaintiff and others in terms of Exh. P.9B. The Plaintiff continued to use the structures as a factory until the 25th November 1969 when the staff of the Resettlement Department arrived and demolished the structures. The state of the structures after demolition is shown in Exh.P.6.

11. The Plaintiff says that he never knew that the land and structures he rented were not permitted for use for industrial purposes until Government officers went to investigate in August 1969 and never knew that such structures were designated as early as 1968 to be used as chicken sheds only until Defendant filed her defence.

12. He lists his claim as follows:-

1.  $3,500 rent deposit.

2.  $1,600 electricity charges deposit.

3.  $7,500 being the loss of profit for5 months @ $1,500 which he made whenthe factory was in operation.

4.  $18,000 for dismantling, removal and reinstallation at another place of his machinery.

5.  $3,500 for breakage of machinery inthe course of removal and dismantling.

6.  $5,000 for loss of material.

7.  General damages for loss of tenure or full enjoyment of the full term of tenancy.

However, when he, the Plaintiff, is asked to produce evidence of his specialdamages he indicates that he limits his overall claim to the round sum of $50,000.

13. He also produces the business registration certificate of the Wah Hing Plastic Factory, - Exh. P.1, to show that he is the sole proprietor and has no partner.

14. The Defendant’s evidence is that sometime in April 1969 the Defendant’s husband, Law Chi, caused an advertisement to be inserted in the newspaper about certain land and premises to be let for industrial purposes. Law Chi in his evidence says that the land and structure advertised had no connection with the land and structure eventually let to the Wah Hing Plastic Factory. The land and structures advertised were then an incomplete project he had planned with a friend in Koo Tung Sheung Shui. The advertise­ment was inserted to sound out market conditions. The land and structure eventually let to the Wah Hing Plastic Factory were situate in Nam Ti or Lam Ti.

15. However, after the advertisement appeared in the press one Tang Wah (as distinguished from Tang Wah Leung) approached him for a lease of premises for a factory. He told Tang that the land and premises advertised were not yet ready. In reply to Tang’s request for an alternative site he mentioned the structures in Lam Ti and told him that they were not factories. An arrangement was made for them to meet the next day and for Tang to view the structures in Lam Ti. After some negotiation Tang one day brought along the Plaintiff and one Mr. Yip. In their presence Law told Tang that his main conditions were that Tang must not do anything illegally and if he used the structures for industrial purposes any problem arising would be his, Tang’s, responsibility. He said he would let the land for agricultural premises at $350 per structure per month. Eventually Law Chi prepared a tenancy agreement for Tang to sign on the 27th April 1969. At the time of signing Tang asked the Plaintiff to sign the agreement and said the Plaintiff was his brother who would be put in charge of the factory. Thus Exh. P.3 was signed. Eventually the Plaintiff started to operate a plastic factory in the premises let by virtue of Exh. P.3 In June 1969 Law Chi noticed that machines were being installed inside the structures. He asked the Plaintiff whether the latter had contacted the Government. The Plaintiff assured Law that his (Plaintiff’s) brother would fix up everything.

16. Then in August 1969 the Plaintiff approached Law for help. It was at Plaintiff’s request that a number of documents were presented to and interviews arranged to see the District Officer with the view of obtaining permit to use the structurefor industrial purposes. The correspondence with the District Office is to be found in Exhs. P.9 and P.10. In the end no permission was obtained and a final warning was issued to the Plaintiff and Law Chi by the District Officer - Exh. P.9(B). The Plaintiff continued to use the structures as a factory. Thus on the 25th November 1969 the structures were demolished by the Resettlement Department for violation of the permitted user. The Plaintiff continued to use the land, however, as a factory until the 20th January 1970. The Plaintiff paid rent up to the 14th January 1970 and electricity charges up to the 14th December 1969. The unpaid electricity charges for the period between the 15th December 1969 and 14th January 1970 amounted to $1,556.70. In addition there are electricity charges between the 15th January 1970 and 20th January 1970 unpaid. Thus the Defendant claims a set-off for the electricity charges deposit of $1,600 which Law Chi now admits having received from the Plaintiff. As to the structures demolished there is defence evidence to show that each will now cost $20,000 to rebuild.

17. In addition to the aforesaid evidence there is the evidence of two witnesses both subpoenaed by the Plaintiff as well as the Defendant. They are Mr. Arthur Evans and Mrs. Wong Wah. Their evidence has not thrown any further light to the case. However from Mr. Evans’ evidence it is quite clear that part of the land let to the Plaintiff by the Defendant is in fact Crown land Lot No 2583. The structures let to the Plaintiff were erected not on any of the lots Nos. 2537, 2539 or 2549 but on Lot No. 2583 which is Crown land.

18. On the evidence before me I find the following facts.

19. By a tenancy agreement dated the 11th October 1967 the Defendant acquired a lease from one Chu Ka Nai of the land known as Lots Nos. 2537, 2539 and 2549 at Lam Ti together with some structured thereon for a term of 8 years commencing on the 15th May 1967 - see Exh. D.8.Unknown to the parties some of the structures including the two structures eventually let to the Plaintiff, were built upon Crown land Lot No. 2583 which was held by Chu Ka Nai by virtue of an annual permit issued by the District Office, Un Long. This is evidentin Mr. Evans’ evidence and in Exh. P.16 and P.17. Near theendof 1968 there was a survey ofthe structures erected on the aforesaid area by the Resettlement Department. The two Structures eventually let to the Plaintiff were marked SHT/9B1/753 and SHT/9B1/760 with permitted user as chicken sheds only.  In April 1969 the Plaintiff or his agent read anadvertisement in the SingTao Daily News to the effect that there were factory premises in the New Territories to let - see Exh. P.2. This led to negotiation between the Plaintiff and Law Chi, the Defendant witness who is the Defendant’s husband and agent having the conduct and negotiation of the whole transaction.

20. Pausing at this stage I must observe that the advertisement in Exh. P.2 referred to the structures in Lots Nos. 2537, 2539 and 2549 of Lam Ti and not to an unfinished project in Koo Tung of Sheung Shui as Law Chi had put it. Having regard to the wording in Exh. P.2 and the lack of corroborative evidence Law Chi’s account in this respect is singularly unconvincing. In view of the reasons in this judgment, however, the contents of this document are immaterial.

21. Continuing my findings of facts, I am of opinion that during the negotiation Law Chi well knew that the said structures SHT/9B1/753 andSHT/9B1/760 were permitted to be used as chicken sheds only. That is why in his evidence in chief he says that he told Tang Wah at the time that he would be prepared to let the lots of land as agricultural land at $350 per structure. I accept the Plaintiff’s evidence to the extent that at no time, up to the signing of the tenancy agreement Exh. P.3, had Law Chi told him (the Plaintiff) that the only permitted user of the said structures was that for chicken sheds only and that at all times he intended to find premises to set up a factory. However, I do not find that Law Chi expressly told the Plaintiff that the structures were permitted to be used as a factory. Considering Law Chi’s evidence I find that he (Law) was happy to be reticent about this matter and the Plaintiff fell into his trap. This may be sharp practice but not conduct amounting to his misrepresentation. I also find thatthe Plaintiff knew or ought to have known that the structures erected on a hillside in the New Territorieswere probably fit for agricultural or farming purposes only but being so eager to start his factory he was prepared to take the risk. In short both parties harboured the thought that once the factory has been established the proper authorities would be presented with a fait accompli and would not be refused permission -a sentimentwhich is not uncommon with the farming people in the NewTerritories. This is evident in thesubsequent conduct of the parties after August 1969 and the documents presented to the District Office - Exhs. P.9(A), P.9(C), and P.10(C). Had the Plaintiff been misled in the first instance either by innocent or fraudulent misrepre­sentation I would expect him to bring an action for recission as soon as he learned that the structures were to be used as chicken sheds only. However, he chose to co-operate with Law Chi.

22. In any event, a tenancy agreement was drawn up and signed by both the Plaintiff and the Defendant - Exh. P.3. The Plaintiff moved in and set up a factory as from the month of May 1969. I reject Law Chi’s evidence that he warned the Plaintiff of the risk in the following month - in June. In the meanwhile the Plaintiff had paid over to the Defendant two sums of $3,500 and $1,600 for rent deposit and electricity charges depositrespectively - Exh. P. and. Exh. P.5. On the 8th August 1969 there was an investigation by the staff of the Resettlement Department resulting in a notice dated the 8th August 1969 - Exh. D1 - being served on the Plaintiff. This notice asks the Plaintiff to furnish proof in 48 hours “that the building which ..... has been erected on the land situated at San Hing Tsuen, Yuen Long ….. is in accordance with the terms of the Crown lease or permit under which such land is held”. This notice prompted the Plaintiff and Law Chi to join forces with occupiers of other structures to make representation to the District Officer Yuen Long during the period between August and October 1969. In this connection I find that the joint representation between the Plaintiff an Law Chi was dictated my mutual interest and not, as the Plaintiff suggests, that he had no alternative but to trust Law Chi or as Law Chi suggests that the Plaintiff repeatedly requested his assistance. Had the position been otherwise the Plaintiff would at once pursue his legal remedy and Law Chi would not have involved himself in expenses of over $2,000 in obtaining legal advice and representation on the issue for himself and others. All the representation in writing and in personal interview were rejected and final notice dated the 2nd October,1969 - Exhs. P.9(B) and P.13 was served on the occupiers. The Plaintiff ignored the notice and continued to use the structures as a factory. On the 25th November 1969 the structures occupied by the Plaintiff by virtue of the tenancy agreement Exh. P.3 were demolished by the Resettlement Department. But the Plaintiff continued to make use of them as a make shift factory until the 20th January 1970. The Crown land permit in respect of Lot No. 2583 on which the said structures stood was cancelled for breach of conditions on 1st January 1971.

23. Mr. Mills-Owens for theDefendant relies strongly on the principle of caveat emptor. I would agree that there is great force in his argument. First of allthe parties saw fit to reduce their contract into writing - the tenancy agreement Exh. P.3. Their respective rights, and obligations are to be found within the four corners of the written agreement. All the contents of the advertisement - Exh. P.2 and the preliminary negotiations do not form a collateral contract so as to contradict the contract in writing. In Cheshire and Fifoot on the Law of Contract 7th Edition page 103 it is said that:

“If the contract is wholly inwriting, the discovery of what was written normally presents no difficulty, and its interpretation is a matter exclusively within the jurisdiction of the judge.But on this hypothesis the courts havelong insisted that the parties are to be confined within the four corners of the document in which they have chosen to enshrine their agree­ment. Neither of them may adduce evidence to show that his intention has been mis­stated in the document or that some essen­tial feature of the transaction has been omitted.

‘It is firmly established as a ruleof law that parol evidence cannot be admitted to add to, vary or contradict a deed or other written instrument. Accordingly it has been held that ... parol evidence will not be admitted to prove that some particular term, which had been verbally agreed upon, had been omitted (by design or otherwise) from a written instrument constituting a valid and operative contract between the parties.’”

In the case of Hill v. Harris(1)where the underlessee brought an action for compensation for breach of warranty against the underlessor on the ground that the superior landlord prohibited certain user of the premises whichwas not prohibited in the underlease it was held that the submission of a draft sub-lease was no more than an offer to negotiate a sub-lease on the terms of the draft; accordingly there being no implied warranty the Plaintiff’s claim failed. In the course of his judgment Diplock L.J. said at page 615:-

“On those facts, the plaintiff has sought to erect awarranty by the defendants for breach of which he seeks damages, that the premises could be used for the business of a confec­tionery and tobacco retailer. I stress that this is an action brought for breach of warranty, a collateral warranty entered intoat the time at which the sub-lease was executed. It is not an action for rescission based on innocent misrepresentation; it would have other difficulties in its way if it were. It is not an action for damages for fraudulent misrepresentation. There is no suggestion whatever that there was any fraudulent misrepresentation in this case. So what has to be established is that somewhere and somehow the defendants entered into a contract in these terms: ‘If you will take a sub-lease of these premises, we undertake as a matter of contract that they can be used for the purpose of con­fectionery and tobacco retailer.’

The first observation I should make about that is that, when parties have entered into a sub-lease which has been the subject of negotiations between them over a period of some six months, one is unlikely to find the terms upon which the premises are to be held, or any relevant covenants in relation to the premises, outside the terms of the negotiated sub-lease itself. Anything that goes on before that date is, prima facie, negotiation, as indeed is apparent from the letter of March 9, 1959, from the estate agents which indicated that the final terms of the contract between the parties were to be found in the sub-lease, or would eventually be found in thesub-lease, to be negotiated by the solicitors.”

24. In the present case the draft sub-lease eventually signed was prepared by Law Chi. It was no more than an offer for negotiation. For his protection the Plaintiff should have insisted on an express covenant for his protection.

25. In Woodfall’s Landlord and Tenant 27th Edition Para. 1313 it is said that:-

“A lessee is a purchaser pro tanto, to whom the maximcavent emptor applies if he does not take advantage of his fair opportunities, notwithstanding that he is not entitled to call for and investigate the lessor’s title unless he stipulates to the contrary, and that it is not usual to make such investiga­tion. Therefore, he should, at his peril, be satisfied that the intended lessor has sufficient title to demisefor the proposed term, and that his conveyance does not restrict him from permitting the premises to be used for any trade or business intended: or the lessee should (if possible) obtain from the lessor an unqualified covenant for quiet enjoyment during theterm, without any interruption or disturbance by the lessor, ‘or by any other person or persons whomsoever’; i.e., against all persons having lawful title: or he must take his chance and run all risks as to the lessor’s title. Where the lessee is to build upon or otherwise improve the demised premises, or pays a premium for the lease, he should take care either to stipulate for the right to investigate the lessor’s title (or at all events to see the conveyance to him): or he should obtain anunqualified covenant for quiet enjoyment during the term.”

26. Clause 4 of the tenancy agreement provides that:-

“The lessee is to make use of the structures for proper industrial purposes .....”

But there is no covenant on the part of the Defendant that the structures are fit for use as a factory. The facts of this case are very similar to the facts in Hill v. Harris where Diplock L.J. said at page 614:-

“It has been submitted that, where a lease of property is entered into and it is in the contemplation of both parties that the property shall be used for a certain purpose, there is contract or condition on the part of the landlord, implied by law, that the premises are fit for the purpose, that is to say, that they can lawfully be used for the purpose, and that there will be no let or hindrance to their being so used. That is a proposition in support of which no authorityhas been cited. Devlin J. in Edler v. Auerbach(2), said: ‘The relevant principle of law was enunciated by Parke B. in Hart v. Windsor(3), and quotedwith approval by Scrutton L.J. in Bottomleyv.Bannister(4), and is as follows: “There is no contract, still less a condition, implied by law on the demise of real property”‘only, that it is fit for the purpose for which it is let.’“Devlin J. went on: ‘This principle has often been applied in cases where the premises are physically unfit for the purpose. I think it equally applicable where premises are, so to speak, legally unfit. It is the business of the tenant, if he does not protect himself by an express warranty, to satisfy himself that the premises are fit for the purpose for which he wants to use them, whether that fitness depends upon the state of their structure, the state of the law, or any other relevant circumstances.’”

27. In view of the aforesaid even if my finding of fact is wrong in that I found the Plaintiff knew the structures were for agricultural user only the Plaintiff would still fail in his action in law.

28. As to the implied covenant of quietenjoyment I only have to make the observationthat the interference of the Plaintiff’s quiet enjoyment was by the head landlord, the Crown and not by anyone claiming through or under the Defendant’s title. It is stated in Woodfall para. 1306 that:-

“There has also been a conflict of authorities as to the extent of the implied contract for quiet enjoyment. It was at one time generally supposed that the implied contract extended to interruptions by title paramount, and that authorities to the contrary, i.e., that the contract merely applies to the acts of the lessor himself or his assigns, were to be disregarded. In Baynes v. Lloyd(5)the Court of Appeal, though admitting the conflict, did not attempt to solve the question, but it is submitted that the question must now be considered to have been answered by Jones v. Lavington(6) in favour of the landlord, and that an implied contract does not extend to interruptions by persons claiming by title paramount.”

Clause 2 of the tenancy agreement Exh. P.3 provides that:-

“It is agreed that the rent shall be at the rate of $700 per month. During the 80 months term Party B (the lessee) must payrent to Part A (lessor) in advance on the first day of each and every month …..”

Clause 3 of Exh. P.3 provides that:-

“…..Party B (lessee) shall not reduce the rent or determine the tenancy under any excuse during the term or otherwise. Party B shall have to pay the rent for the residue of the term at the agreed rate.”

In view of the express agreement to pay rent I am of opinion that the Plaintiff is liable for rent even after the demolition of the structures. He was still in law in possession of the land. His liability ceases only when the Crown re-entered on the 1st January 1971.

29. The Defendant claims a set off. As regard the $3,500 deposit it is proved that the Plaintiff has not paid rent since the 15th January 1970. The Defendant is entitled to set-off this sum for rent up to 14th June 1970. Regarding the $1,600 deposit for electricity charges I am satisfied thatthe Defendant had to defray on behalf of the Plaintiff the electricity charges to the extent of $1,556.70. However, the Defendant in his statement of defence claims a set-off for $1,546.70 and there is no evidence as to theelectricity charges paid for the period between the 15th January 1970 and 20th January 1970. I shall allow a set-off for $1,546.70 leaving a balanceto the credit of the Plaintiff for $53.30.

30. In view of my findings aforesaid the question of Plaintiff’s claim for damages is academic. Even if I am wrong I find that the Plaintiff has not adduced sufficient evidence to prove his claim for $50,000 in damages. His evidence as to loss of profit is not supported by any books of account, his claim for loss in wages and materials and expenses of dismantling and removal of machineries is not supported by anyreceipts or books of account. I am of opinion that hisclaim is not based on a genuine estimate but a grossly inflated figure which bears no relation to his loss. For thesereasons the Plaintiff’s claim for damages is dismissed with costs.

31. I shall now deal with the Defendant’s counter-claim. The Defendant by an original action claims from the Plaintiff trading as the Wah Hing Plastic Factory as 1st Defendant and the Wah Hing Plastic Factory as a firm as 2nd Defendant damages including $30,000 being the value of the two structures, the subject matter of the tenancy agreement - Exh. P.3 and arrears of rent at the rate of $700 per month from the 15th January 1970 to the 24th July 1971, the date of the defence and counter-claim on the ground that the Plaintiff and Wah Hing (Defendants in the counter-claim) have committed a breach of the tenancy agreement. To this the Plaintiff and the Wah Hing Plastic Factory (the Defendants in the counter-claim) filed no defence. In lieu thereof the Plaintiff has amended the Statement of Claim in which he denies any breach of agreement.

32. By Clause 4 of the tenancyagreement - Exh. P.3 the Plaintiff was permitted to use the structures for proper industrial purposes. I findthat the words       “shall not do anything in contravention of the laws and regulations of the Government of Hong Kong” in Clause 4 do not extend to cover using the structures, contrary to theconditions of the Crown Land Permit. There is nothing illegal per se in establishing a plastic factory. Further, the words “All Government matters in connection with or arising from the industry shouldbe attended by Party B (i.e. the Plaintiff) himself .....” do not amount to a covenant by the Plaintiff to guarantee to obtain a conversion of user by the Government. In my previous findings of facts I found that the original intention of the parties in Exh. P.3 anticipated that the structures was to be used for industrial purposes. I found that the Defendant (landlord) knew at the time that the user of the structures was restricted to chicken sheds. I also found as a fact that Law Chi never warned the Plaintiff about the user of these structures in June 1969. Neither the Plaintiff nor the Wah Hing Plastic Factory committed any breach of agreement by using the structures as a plastic factory. If anything is wrong it is that both parties knowing that such mode of user is contrary to the conditions of the Crown Land Permit allowed the structures to be used as factory. Even after a query was made by the District Officer Yuen Long the Defendant was assisting the Plaintiff to justify or to plead for the existence of the factory. Sufficient it is to say that the Defendant’s claim for damages should fail on the principle of “In pari delicto portiorest conditio defendentis”. Apart from this the Defendant has adduced no evidence to show any damages he has suffered apart from the demolition of the two structures.

33. Mr. Mills-Owens, relies, in his claim for the value of the demolished structures, on a passage in Megarry on the Law of Real Property - 3rd edition P.689 – “But since 1267 it has been laid down by statute that a tenant for a fixed term of years is liable for both voluntary and permissive waste unless there is a contrary agreement”. But the waste in this case is neither voluntary nor permissive.

34. Mr. Mills-Owens also relies on Clause 5 of the tenancy agreement which provides that:‑

“If (Party B) wants to make any alteration or extension to the structures the consent of Party A should beobtained beforehand, and on his moving out at the expiration of his term (Party B) shall not remove or damage the same which shall unconditionally become the property of Party A. All costs and repair expenses shall be borne by Party B and may not be deducted from the rental”.

I find that this is a covenant referring to alteration and extension of the sturcture and has nothing to do with the original structures.

35. For reasons given I have found the Plaintiff liable to pay rent up to the 31st December 1970 as the Crown re-entered on the land in question. In view of the aforesaid I dismiss the Defendant’s counter-claim for damages including the $30,000. The Defendant’s claim for arrears of rent is allowed at the rate of $700 per month from the 15th June 1970 up to the 31st December 1970.

36. The net result is that the Plaintiff’s claim for damages is dismissied with costs. His claim for return of deposit is allowed to the extent of $53.30. The Defendant’s claim for damages is dismissed. His Claim for arrears of retn is allowed to the extent of $4,550 being 6½ months’ rent with ¼ of costs. The sum of $4,550 is to be reduced by $53.30.

Plaintiff in person.

Mills-Owens (Rowdget W. Young & Co.) for Defendant.

(1) 1965 2 Q.B. 601

(2)1950 1 K.B. 359 at 373

(3)1843 12 M & W 68, 87

(4)1932 1 K.B. 458, 468

(5)1895 2 Q.B. 610

(6)1903 1 K.B. 253