IAIN MACKENZIE FIDLIN v. FORTUNE FOND LTD

DCCJ6535/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6535 OF 2002

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J U D G M E N T

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Introduction

1. On or about 29th August 2002, the Plaintiff ("P") (as tenant) and the Defendant ("D") (as landlord) entered into a Provisional Tenancy Agreement ("PTA") whereby P agreed to rent and D agreed to let Flat 6 on 2/F together with portion of roof immediately above and one car parking space, No.52 Stanley Village Road, Hong Kong ("Premises") at a monthly rent of HK$48,800.00.

2. The following are the express terms of PTA :

"......

Tenancy from Oct 31, 2002 to Oct 30, 2004 ......

Rental :	Monthly rental HK$48,800.00 ......
	The Tenant shall be responsible to pay management fees, government rates and all other outgoings.
	The Landlord shall be responsible to pay government rent, management fees and government rates.
Security Deposit :	HK$97,600.00 (i.e. 2 month(s) rental plus - month(s) management fees and government rates) ["Security Deposit"]
Advanced Payment :	HK$48,800.00 (i.e. 1 month(s) rental plus - month(s) management fees and government rates) ["Advanced Payment"]
Payments :	Preliminary deposit : HK$48,800.00 ...... (i.e. 1 month(s) rental plus - month(s) management fees and government rates) ["Preliminary Deposit"]
	The balance of security deposit and advanced payment HK$97,600.00 ...... shall be paid on or before (Date) Sept 10, 2002 (i.e. 2 month(s) rental plus - month(s) management fees and government rates)

The formal Tenancy Agreement ["FTA"] Must be signed on or before (Date) Sept 10, 2002

......

Delivery Date : Oct 31, 2002

Terms and Conditions :

......

3.	Should the Tenant fail to complete the deal in the manner herein contained the deposit paid hereunder shall be forfeited and the Landlord shall then be entitled at his absolute discretion to let the said premises to anyone he thinks fit and the Landlord shall not sue the Tenant for any liabilities and/or damages caused by the Tenant's default of this agreement. ["Clause 3"]
4.	Should the Landlord fail to let the said premises to the Tenant in the manner herein contained the Landlord shall compensate the Tenant with a sum equivalent to the amount of the deposit together with the refund of deposit and the Tenant shall not take any further action to claim for damages or to enforce specific performance. ["Clause 4"]

......

Remarks : see Rider

Received deposit from the Tenant HK$48,800 Bank : HSBC
Received by the Landlord : (signed with D's stamp) Cheque No. : 860095

Confirmed and accepted by the Landlord : (signed with D's stamp) ......
Agent for and on behalf of Treasure Land (Luxury) Property Consultants Ltd. ["Agent"]
(signed) Date : 29 August 2002
Confirmed and accepted by the Tenant : (signed by P) ......

Rider

9.	The Landlord agrees to carry out the followings on or before the delivery date :
	a)	Clean the said premises thoroughly;
	b)	Check all electrical wirings, air-conditioning, appliances, plumbing and ensure that they are all in working condition;
	c)	Repaint all walls and ceilings;
	d)	Wax the floor;
	e)	Provide the existing fridge and the existing stove. ["Rider 9"]
10.	After the expiration of the first twelve months, the tenant shall have the right to terminate the contract by giving two months written notice, or paying the rent in lieu. ["Rider 10"]

......

Confirmed and Accepted by (signed with D's stamp) Landlord
Confirmed and Accepted by (signed by P) Tenant"

3. P claimed the following terms ("Terms") were implied in PTA by operation of law and/or to give business efficacy thereto :

(a)	each party would co-operate to ensure the performance of PTA including but not limited to the signing and execution of FTA by both parties, and take all necessary steps to ensure performance of the same ("1st Term");
(b)	each party would not take steps to prevent performance of PTA by the other party ("2nd Term").

4. P claimed that D wrongfully and in breach of PTA (in particular, Terms) failed to sign FTA on or before 10th September 2002 or at all and failed to refund Preliminary Deposit. P claimed under Clause 4 a total sum of HK$97,600.00 being refund of Preliminary Deposit together with a sum of HK$48,800.00 (equivalent to the amount of Preliminary Deposit) as compensation. Alternatively, P claimed for loss of Preliminary Deposit in the sum of HK$48,800.00 as damages for D's breach of PTA.

5. D denied any breach of PTA and instead claimed that P was in breach of PTA by failing/refusing to sign FTA and to pay balance of Security Deposit and Advanced Payment ("Sums") on or before 10th September 2002 or at all. By a letter dated 10th September 2002 ("10/9/02 Letter"), P through Jennifer Mok ("Mok") of Agent asked D for a two-week extension to 25th September 2002 ("Extension") for the execution of FTA ("Request"), to which D disagreed. As a result of P's aforesaid breaches and pursuant to Clause 3, D forfeited Preliminary Deposit.

6. Mr Chang, counsel for P, accepted that the time for performance of the obligations under PTA on 10th September 2002 was of the essence. He further confirmed that P would not contend that Clause 4 was a penalty clause.

7. At the beginning of trial, I granted leave to P to amend his Statement of Claim to plead inter alia Terms. Mr Chang in the course of his opening applied to re-amend the Amended Statement of Claim to include a further and alternative plea that (a) D did not insist on P signing FTA on 10th September 2002 and D thereafter failed to give notice to P to fix a reasonable time for signing FTA, and (b) D evinced an intention not to proceed with the signing of FTA by its letter to P dated 12th September 2002 ("12/9/02 Letter"). After hearing submissions from Mr Chang and Mr Chan, counsel for D, I granted leave for the further amendment sought but considered that D should be entitled to an adjournment of the trial (particularly in light of its election before receiving notice of the proposed amendment not to call Iris Leung ("Leung") of Agent to give evidence at the trial) to enable it to consider and gather the relevant evidence from Agent (if possible) to rebut P's new plea. However, both counsel eventually agreed that P would abandon the further amendments sought and both parties would proceed to trial on the existing pleadings. In any event, given my findings of fact below inter alia that P was not led to believe that the time stipulation for signing FTA was extended or not insisted upon and that Request and Concession (see below) were initiated by P and not by D, the proposed re-amendment of the pleadings becomes immaterial.

8. From the above, the case started off as a simple dispute as to who (if any) failed to complete the deal in the manner provided in PTA, or to put the matter simply, who repudiated PTA. However, both counsel's industrious labour resulted in not less than 34 legal authorities. But in the end this case is resolved on fundamental principles of contract.

Witnesses

9. It is necessary to say a word about witnesses. Only P himself gave evidence. D's administration manager responsible for tenancy matters, Zee Ho Man Gilbert ("Zee"), gave evidence. P and Zee adopted their witness statements as part of their evidence-in-chief. The documents included in the trial bundle are agreed by the parties as to admissibility and authenticity.

10. When Zee was examined in chief on the 3rd day of trial, it was discovered that he had been referring to some notes (3 pages) since giving evidence that morning ("Notes") although he said he only made minor reference to them. Zee said he made Notes to record important communications with Mok/Leung between 29th August and 12th September 2002 in respect of the subject tenancy, including telephone conversations between 6th and 9th September 2002 on Amendments (see below). It was his usual practice, if he was in the office, to record particulars of his communications with agents/tenants on tenancy matters from the time of execution of the provisional tenancy agreements until delivery of possession of the relevant properties to the tenants. He would be unable to make such records if, say, he was in the street or driving. Zee admitted he would not have remembered the full details of the events in August/September 2002 by the time of trial had he not had Notes. He claimed Notes were accurate but he had not shown them to anyone, including his colleagues or D's legal representatives. Notes were also not produced in evidence.

11. Zee knew his witness statement should recount important matters but he said if there were omissions, it might be due to his carelessness rather than inaccuracies in the statement. Although Notes were already in existence by the time his witness statement was prepared, Zee did not tell or show D's solicitors Notes. They also did not ask for Notes although Zee mentioned his usual practice of making such records. D's solicitors only asked Zee if the contents of his witness statement were accurate. Zee considered his witness statement was fine as it contained the important matters, ie the results and not the course of the negotiations. He had no impression whether D's solicitors had advised him that his credibility might be affected by his selective description of events.

12. Zee gave detailed evidence at the trial on his communications with Mok/Leung to illustrate the to and fro negotiations (which were not easy) during discussions on Request. Mr Chang complained that on the 3rd day of trial, unlike the 2nd day when Zee first gave evidence, he recalled extensive details of various telephone conversations with Mok which did not appear in his witness statement. Mr Chan fairly accepted that Zee did give evidence on certain matters which were not in his witness statement and which were not put to P during cross-examination. In light of the developments, both counsel agreed to have P recalled to give evidence in rebuttal. Although it was at one stage suggested that there might be a need to locate Mok, Mr Chang after taking instructions confirmed that P would not ask for any adjournment to try to locate or call Mok as a witness. Both counsel agreed that the matter of Zee's reference to Notes was a matter to be considered in assessing the credibility and weight of his evidence.

P's case

13. P formerly worked for Commerzbank AG ("CAG") in London with a year spent in Germany before he was seconded to Hong Kong under a contract which ended on 31st July 2002. He was invited to return to London but there was no available position that reflected his seniority. P took severance from CAG and planned to set up a corporate consultancy business as an interim measure.

14. P lived with his family for 5 years at an apartment in South Bay ("SB Apartment") rented by CAG from Kerry Properties Limited. He continued to stay there from August to October 2002 whilst on garden leave during severance negotiations. P and his wife started to look for a flat to rent in Stanley in early August 2002. They were contacted by Agent by a cold call and were subsequently introduced to Mok. Agent became P's agent but acted for D as well. P and his wife inspected Premises (which they liked very much) on 23rd August 2002. D (owner of Premises) offered to let Premises to P on the terms set out in an offer letter on Agent's letterhead ("24/8/02 Offer"), which offer was accepted by P when he countersigned the same on the same day.

15. After further negotiations, P and D entered into PTA and P paid Preliminary Deposit. P understood that PTA was binding on the parties. He ceased looking for other accommodation once he entered into negotiations for renting Premises and/or paid Preliminary Deposit. The commencement of the subject tenancy in October 2002 tied in with the end of P's occupation of SB Apartment.

16. Agent forwarded a copy of draft FTA ("Draft") to P on/about 30th August 2002 for his review. Between 30th August and 6th September 2002, P showed PTA to and reviewed Draft with his solicitor and made various amendments ("Amendments"), some of which came from P's commercial experience. P consulted his solicitor on most Amendments (including those for Clause 9 of Draft ("Clause 9")) and wrote up Amendments in his solicitor's presence. P then forwarded his handwritten Amendments to Mok by fax under cover of his letter on 6th September 2002 ("6/9/02 Letter").

17. Most Amendments related to the issue of reasonableness but no explanation for Amendments was provided to D. P believed that Amendments (highlighted in italics below) were reasonable, in keeping with market practice and protected both parties' interests :

(1)	Clause 4 of Draft
	"... In the event that the Tenant shall fully and faithfully comply with all his obligations hereunder, the said deposit shall be returned in Hong Kong dollars without interest thereon to the Tenant within 60 30 days after delivery of vacant possession of the said premises to the Landlord ......"
(2)	Clause 5(b) of Draft ("Clause 5(b)")
	"The Tenant hereby agrees with the Landlord as follows : - ...... (b) To pay the maintenance fees and all other taxes, assessments, charges impositions and water & sewage, electricity, telephone and gas charges and all other outgoings in respect of the said premises (Management Fee, Government Rates, Government Rent and Property Tax and all outgoings capital in nature excepted)."
	P had in mind expenses similar to government rates and fees/duties other than utilities (such as the equivalent to the Scottish land levy) for "all outgoings capital in nature" but did not know if there were actually such capital outgoings, so Amendments were intended to be a catch-all provision.
(3)	Clause 5(g) of Draft ("Clause 5(g)")
	"The Tenant hereby agrees with the Landlord as follows : - ...... (g) To keep in good order and condition all the drains and pipes in the said premises and to pay to the Landlord on demand the reasonable cost incurred by the Landlord in cleansing and clearing any of the drains and pipes choked or stopped up owing to careless use thereof by the tenant or his employees servants or any persons authorised by him."
(4)	Clause 5(i) of Draft ("Clause 5(i)")
	P marked 3 vertical lines next to this clause. To the best of his recollection, P suggested the deletions in Clause 5(b) because they were duplicated by Clause 5(i).
(5)	Clause 5(j) of Draft ("Clause 5(j)")
	"The Tenant hereby agrees with the Landlord as follows :- ...... (j) To permit the Landlord and his agents with or without workmen and others and with or without tools and appliances after giving reasonable written notice at all reasonable times to enter and view the state of repair of the said premises to take inventories of the fixtures therein and to carry out any repairs to the main walls timbers or structure thereof and also to amend and repair any defects for which the Tenant is liable and which he has failed to amend and repair in a proper and workmanlike manner within 30 days of the receipt of notice thereof from the landlord and to pay the Landlord's reasonable cost of carrying out any such repairs or work in connection with any such notice as aforesaid."
	P had in mind 2 to 3 days' notice which was not sufficiently covered by the provision for D to enter Premises "at all reasonable times". The reference to "reasonable wear and tear" in Clause 4 of Draft and "from time to time as reasonably required to do so by the Landlord" in Clause 5(f) showed Amendments were consistent with Draft.
(6)	Clause 5(m) of Draft ("Clause 5(m)")
	"The Tenant hereby agrees with the Landlord as follows :- ...... (m) Not without the previous consent in writing of the Landlord (such consent not to be unreasonably withheld or delayed) to make or permit any alterations in the said premises nor pull down alter or remove any portion of the partitions or fittings thereof nor make any alterations in the architectural features or facings or to the electrical installations thereof nor to cut maim or injure or suffer to be cut maimed or injured any doors windows walls joists cement concrete columns beams or girders thereof."
(7)	Clause 5(p) of Draft ("Clause 5(p)")
	"The Tenant hereby agrees with the Landlord as follows :- ...... (p) Not to exhibit display of (sic) affix any writing sign or other device whether illuminated or not at any part of the said premises without getting approval from the Landlord such consent not to be unreasonably withheld or delayed."
(8)	Clause 6(b) of Draft ("Clause 6(b)")
	"The Landlord hereby agrees with the Tenant as follows :- ...... (b) To pay Property Tax, Government Rates and Rent and Management Fee and all outgoings of a capital nature in respect of the said premises."
	Amendments here mirrored those for Clause 5(b).
(9)	Clause 7(b) of Draft ("Clause 7(b)")
	"...... All reasonable costs and expenses incurred by the Landlord in demanding the rent and other charges shall be repaid by the Tenant and shall be recoverable from him as a debt."
(10)	Clause 7(c) of Draft ("Clause 7(c)")
	"...... It is also agreed and declared notwithstanding any other provision herein the Tenant's optional right(s) (if any) shall extinguish and determine upon the service of the said notice of termination (whether the same shall have been exercised by the Tenant or not) and the Tenant shall not be entitled to any claim against the Landlord for any damages or compensation or any relief against such early termination of optional right(s) save for the Tenant exercising his rights hereunder in particular recovery of the said Deposit."
	Amendments were to ensure P would not be precluded from receiving refund of Security Deposit. However, P agreed that (a) this provision was directed at the tenant's optional rights, (b) no optional rights were granted to the tenant in Draft and (c) P believed Clause 4 of Draft already provided for the refund of Security Deposit upon compliance of the tenant's obligations. Thus Amendments were probably superfluous but were suggested for the avoidance of doubt and not intended to prejudice D's rights.
(11)	Clause 9
	"Notwithstanding anything to the contrary hereinbefore contained, it is hereby mutually agreed between the parties hereto that the Tenant shall be at liberty to terminate this Tenancy Agreement after a period of twelve (12) months from the date of commencement of the tenancy hereby created by giving to the Landlord two (2) months' previous notice in writing of such intention so to do, i.e. minimum fourteen (14) months' occupancy, or paying two (2) months' rental as a penalty in lieu of notice to terminate the leave, except that in the event the Tenant shall be transferred permanently out of the Hong Kong Special Administrative Region of the People's Republic of China, then the Tenant shall have the right to serve upon the Landlord not less than two (2) months' prior written notice and upon the expiration of such notice, this Tenancy Agreement shall terminate and the Tenant shall quit and deliver up vacant possession of the premises to the Landlord in good clean manner as provided herein and the Landlord shall refund to the Tenant the Deposit as provided herein."
	As P had no Hong Kong experience apart from his secondment by CAG, he could not rule out a future possibility that he might work for a similar institution with a branch in Hong Kong but domiciled overseas. Such Amendments were usual for expatriate tenants and indeed, such provision was found in the tenancy agreement for SB Apartment.

18. On 7th September 2002, Mok faxed Draft to P with marked up Amendments and handwritten notations thereon which essentially rejected almost all Amendments except those in Clauses 4 and 6(b) of Draft ("Written Comments"). P understood Written Comments as follows :

(1)	Clause 4 of Draft : D appeared to accept Amendments as shown by "√".
(2)	Clause 5(b) : As best as P could recollect, the handwritten notations (which were very blurred) of "outgoings capital in nature is MF, GR, GR & PT ...... will be outgoings in nature" suggested that Amendments were rejected. D apparently claimed that "all outgoings capital in nature" were covered by management fees, government rates, government rent and property tax, and these items had already been excepted.
(3)	Clause 5(g) : The notation of "hard to define" when read with other Written Comments meant that D considered it would be hard to define what would be "reasonable" costs, hence it was a rejection of Amendments.
(4)	Clause 5(i) : "?" marked thereon appeared to be a query as to why P placed vertical lines next to this clause.
(5)	Clause 5(j) : P understood the words "after notifying" written next to the first part of Amendments meant D was prepared to give notice but not necessarily the reasonable notice P was seeking. P assumed that "X" marked thereon meant a rejection of the inclusion of the word "reasonable" before "cost".
(6)	Clause 5(m) : In the overall context, P understood the words "hard to define reasonable" meant a rejection of Amendments but such rejection failed to address the issue of delay as raised by Amendments.
(7)	Clause 5(p) : P supposed the blurred notation next to Amendments was a "X" and hence a rejection.
(8)	Clause 6(b) : The "√" meant acceptance of the inclusion of the words "and Rent", but the "X" next to the words "and all outgoings of a capital nature" meant a rejection.
(9)	Clause 7(b) : Although the handwritten notation beneath Amendments was quite blurred, P took it to be a "X" and hence a rejection. Mok never told P that as an alternative to Amendments for "reasonable" costs, D suggested that P could ask D to present 3 cost quotations for P's consideration instead.
(10)	Clause 7(c) : P assumed "X" next to Amendments was a rejection. P did not recall receiving any explanation that Amendments were already covered by Clause 4 of Draft, otherwise he would have sought clarification with his solicitor as it was an important point to him.
(11)	Clause 9 : The words "suppose to be 12 + 2 lease" and the "X" meant a rejection of Amendments.

19. Amendments for inclusion of the concept of "reasonableness" were important to P. D's wholesale rejection of such Amendments was unreasonable since, say, "reasonable costs" set no definite limits but only put them within reasonable brackets for the payee. In P's experience of negotiating numerous contracts, the word "reasonable" was always used by both parties. He was also given to believe by tenants and estate agents that such word was commonly used in Hong Kong.

20. For the other Amendments, D said he probably would not consider the inclusion of the words "all outgoings of a capital nature" in Clauses 5(b) and 6(b) as a deal breaker but he did not understand D's rejection when the purpose of the phrase was for clarification. P also would probably have given up Amendments to Clause 9, again not seeing it as a deal breaker. He accepted that the objection of "suppose to be 12 + 2 lease" was reflected in Rider 10 but said he did not believe that he was insisting on such Amendments. Further, P felt Amendments to Clause 7(c) were standard and would protect P's rights for the avoidance of doubt but would not hurt D.

21. P was not asked to explain and did not clarify the meaning of the 3 vertical lines he placed next to Clause 5(i) as it did not appear to be a major matter. Further, he did not seek clarification of the words "hard to define" from D but neither was he approached to provide clarification. P expected to be (but was not) given an opportunity to explain Amendments and for D to explain its objections to enable the documentation to be mutually agreed.

22. P had previously discussed with Mok about his setting up a new company ("Newco") and Mok had asked him for a brief description of his background. So he wrote and faxed 10/9/02 Letter to Agent enclosing a brief outline about Newco and took the opportunity to make Request for Extension by mutual agreement. P stated in the letter that he was genuine in his desire to negotiate FTA, having already provided Preliminary Deposit.

23. P said he did not put forward the setting up of Newco as a reason/condition for Request for Extension and further said Concession (see below) was sufficient to support Request. He did however in 11/9/02 Letter (see below) refer to Newco and negotiations with CAG as taking up his time. P's reason for Request all along was for negotiation of FTA in good faith with D. P agreed he had possibly mooted with Mok the possibility of procuring an assurance from a chairman of a listed company that P would rent Premises ("Assurance") but it was an esoteric option given that he had to seek approval for doing so.

24. As the terms of FTA had not yet been agreed by 10th September 2002, P and his wife met with Mok at SB Apartment to discuss ways of and terms/conditions for postponing the execution date of FTA ("1st Meeting"). P could not remember whether 1st Meeting was at Mok's or his request. P at first said they met Mok in the morning (although he was not sure), but when shown 10/9/02 Letter, he said 1st Meeting was probably a reaction to such letter. P could not recall whether they talked about Written Comments but said they would probably have done so as the documentation was the topic of discussion. However, he did not know whether Mok was empowered or qualified to discuss the terms of FTA and suggested that Mok's role appeared to be that of a messenger. P expected Mok to convey his comments to D.

25. P said Agent's approach (as Mok told him) all along was that if he did not sign FTA and pay Sums, Preliminary Deposit would be forfeited. In his witness statement, P said that at 1st Meeting he "offered certain oral concessions" in the hope of convincing D of his sincerity and good faith, and one of these concessions was P's hope to pay another month's rental as holding deposit to subsequently count towards Security Deposit, which P had also agreed could be increased to the equivalent of 3 months' rental ("Concession"). P said in evidence that, to the best of his recollection, Concession was the only concession he volunteered. Mok said she would pass on P's message to D.

26. At this point, P felt that things were slipping away but he wanted to rent Premises. D held a metaphorical gun to his head and Mok brought pressure to bear on him so he was bullied into making Concession. P had been reminded of the consequences of not signing FTA and paying Sums on the due date. He contended that as the documentation had not been agreed, the deadline for signing FTA should be extended. But had P not offered Concession, he would not have the further time to negotiate the terms of FTA. P was not prepared to sign Draft as he had not agreed to its wording.

27. To P's recollection (of which he was not sure at all), Mok did not telephone D at 1st Meeting to communicate Request and Concession. There were communications between P and Mok later on 10th September 2002 but P could not remember whether he spoke with Mok before receipt of the draft Side Letter (see below) from Agent. On 10th September 2002, Mok never mentioned D's Conditions (see below) for agreeing to Extension. If Mok suggested that there be no Amendments as part of Conditions (see below), P would have rejected it.

28. Mok brought the draft Side Letter to P at SB Apartment ("2nd Meeting"), so P said he probably saw Mok twice on 10th September 2002. P recalled Mok coming to SB Apartment many times but he could not remember all the visits and telephone conversations. The draft Side Letter dated 10th September 2002 stated that P and D agreed to postpone the date of signing FTA and P would pay a deposit on 11th September 2002. To P's recollection, he had not seen draft Side Letter before 2nd Meeting because he did not see the fax from Agent to him dated 10th September 2002 (shown to be transmitted at 3:05 pm that day) enclosing the draft Side Letter until 12th September 2002 (as seen from his initials and notation of "signed on 10th" on the fax). By such fax Agent reminded P that D had the right to forfeit Preliminary Deposit if P failed to sign FTA. P did agree to and signed the Side Letter ("Side Letter") on 10th September 2002.

29. P's understanding at the time when he signed Side Letter was that the signing of FTA was postponed but he was not sure to what date and on what terms other than it was expected that he would pay a further month's deposit. He had hoped and expected that it would be for two weeks but it was not confirmed at that time. As D's signature on Side Letter was pending, P said it made sense to say the agreement to postpone the signing of FTA would become definite when both parties signed Side Letter. P agreed that Side Letter did not set out the full details of Request and Concession but he did not ask Mok to state Extension clearly in Side Letter. P said there was considerable pressure on him to prevent loss of Preliminary Deposit or to sign Draft which terms he did not agree, so he could not be expected to think of everything in such circumstances. P did not see D's Conditions (see below) until 12th September 2002.

30. Despite the offer of Concession, P did not effect payment of a further month's rental as deposit on 11th September 2002. P had a telephone conversation with Leung in the morning of 11th September 2002 as referred to in his fax of the same day but he could not remember the contents of that conversation other than some ringing bells on discussion of the term "reasonable". To P's recollection, he did not mention the payment of the further month's deposit during his telephone conversation with Leung as he would not make payment until he saw D's signature on Side Letter. He might possibly have discussed about Request but he did not remember. However, P had always been consistent in his approach and he found D's attitude somewhat inflexible and unreasonable.

31. P said it was not shown that on 10th or 11th September 2002 D had agreed to Side Letter. He did not recall taking any action to see if D had agreed to or signed Side Letter because the onus was not on him to do so. Rather, according to his commercial experience, it was D who should revert to him. P also had not ascertained the extended deadline for signing FTA because the purpose of Side Letter was to provide more time to negotiate the terms of FTA.

32. In his witness statement, P said he further negotiated with Leung/Mok indicating his desire to make Amendments. As clearly shown in his correspondence, P was prepared to enter into FTA subject to some reasonable amendments to the terms of Draft which he wanted to make. He had already paid Preliminary Deposit to indicate his sincerity.

33. Both land and mobile telecommunication problems exacerbated by the typhoon affecting Hong Kong at the time (signal no.8 hoisted at 1:40 pm on 11th September 2002 and lowered at 1:40 am on 12th September 2002 as shown in a letter from Hong Kong Observatory to P's solicitors dated 20th January 2004) meant that P was unable to contact his solicitor or enter into any further negotiations with D through Agent. The prevailing weather conditions could also serve to explain why Agent had difficulty contacting him as asserted by D in 12/9/02 Letter.

34. However, P was able to and did send a letter dated 11th September 2002 to Agent ("11/9/02 Letter"). P believed 11/9/02 Letter was sent to Agent by fax with a copy to his solicitor by e-mail but he could not remember the time when it was dispatched. P again stressed in 11/9/02 Letter that he was very interested in Premises and that he was not looking for any other apartments. He regretted that they were not able to complete the documentation that day but pointed out that there were telecommunications problems which were exacerbated by the typhoon no.8 signal being hoisted. P further stated that the circumstances were beyond anyone's control and he was unable to contact his lawyer.

35. P went on to say in 11/9/02 Letter that under previous advice from his lawyer, he was not prepared to sign FTA unless the term "reasonable" was inserted as previously indicated. P said he was disappointed with D's inflexible attitude and was not really happy "at being asked" (although P confirmed in evidence that he did not recall any specific demand from D) for an additional HK$48,800.00 to secure Extension given the significant enhancement he had already offered to secure that concession. It was said that the fact that D had Preliminary Deposit from P should be sufficient demonstration of his good faith and intent to close FTA. P stated in 11/9/02 Letter that he had explained to Mok that he was still negotiating his severance package with CAG and was in the process of establishing Newco, which put considerable strain on his time and other resources, and he did not wish to have further aggravation at that time. If D still had doubts and wished to put Premises back on the market, then P would expect immediate refund of Preliminary Deposit.

36. P said the purpose of Concession was to show P's good faith to bring D back to the negotiating table at a time when D appeared to be unwilling to extend the deadline for no apparent reason. P said that his only concern was (and he was not prepared to move on) the inclusion of the word "reasonable" in Draft but was willing to let other matters go. Yet when he was asked when he mentioned such willingness, he said he did so whilst giving evidence in court. But when P wrote 11/9/02 Letter, he did not expressly state that he would abandon other Amendments.

37. P said he was not under any financial strain as he was paid by CAG whilst on garden leave and had ￡20,000.00 on deposit. He also expected a significant cash sum on conclusion of his severance negotiations with CAG. To P's recollection, he did not receive any fax from Agent/D on 11th September 2002. Although P could not be contacted in the afternoon of 11th September 2002, he was contactable by land and mobile telephone or fax on 12th September 2002.

38. Leung wrote to P by fax on 12th September 2002 (with copies to Zee and P's solicitor) reminding him to pay Sums and warning him inter alia that failure to pay Sums could mean that D would forfeit Preliminary Deposit. P did not know when he received this fax as it did not contain his usual initials, so he could not recall what he did upon its receipt. P did not take any action on 12th September 2002 to ascertain whether D had agreed to Concession and Request although he did not recall the reason for not doing that. He felt the onus was on D to prove that it had agreed to Request and he had not seen evidence to that effect. It also explained why he did not pay the further month's deposit.

39. D's Zee sent 12/9/02 Letter to P on 12th September 2002 with copy to Leung. In that letter, D referred to the telephone conversation with Mok (P's agent) on 10th September 2002 whereby they mutually agreed on Extension provided that (a) there would be no further amendment of Draft, (b) Security Deposit would be revised to 3 months' rental (ie HK$146,400.00), and (c) P would have to pay a further 1 month's rental as Preliminary Deposit to D on 11th September 2002 and should P fail to sign FTA in respect of Premises, D shall have the right to forfeit Preliminary Deposit of 2 months' rental (ie HK$97,600.00) ("Conditions"). D also referred to his telephone conversations with Mok/Leung on 11th September 2002 when they informed him that P and his lawyer did not revert to them and they were also unable to contact P. D stated that owing to P's failure of the aforesaid commitments, D informed Leung that it had decided to forfeit Preliminary Deposit according to PTA and the deal had fallen through.

40. P first knew of Conditions when he received 12/9/02 Letter, on which he noted his objection and surprise. In respect of Condition (a), he wrote "not agreed ("reasonable")" because at that stage the parties had not yet reached agreement on whether to include the term "reasonable". P said at that stage he was in a state of mind to give up on the other Amendments but not the inclusion of the term "reasonable".

41. P said he was not party to the alleged agreement between D and Mok of 10th September 2002 which did not reflect the terms to which he was prepared to agree. P made clear to Mok at 1st Meeting that he would only pay a further month's deposit if it would be considered as part of the increased Security Deposit and not as supplemental Preliminary Deposit as suggested by D. Irrespective of whether Conditions (a) and (c) were misrepresentations by Mok or conditions imposed by D to suit its own purposes, they were not Concession offered by P.

42. P said that from 11th September 2002 up to when P received 12/9/02 Letter, he was not aware that D had agreed to Request. P was the only party who signed Side Letter and he had not seen D's signature thereto. P had no further contact with D after receipt of 12/9/02 Letter. P then contacted his solicitor.

43. P considered D had unreasonably insisted that he must sign Draft without a chance for him to make his Amendments and unreasonably failed to let Premises to him in breach of PTA. D was contractually obliged under Clause 4 to refund Preliminary Deposit and compensate P with a sum equivalent to Preliminary Deposit (totalling HK$97,600.00) with interest. P denied that he failed to complete the deal in the manner contained in PTA as provided in Clause 3 because at no time did P agree to sign FTA without it actually being agreed.

44. P did not immediately look for another property because he still hoped to return to the negotiating table to work out FTA. But eventually he had no alternative but to look for another property because there was time pressure on his ability to stay at SB Apartment. He felt disadvantaged in the pursuit of alternative accommodation by reason of the time constraint. P noted that Premises apparently remained unlet as at July 2003.

D's case

45. D was a company mainly engaged in letting out properties and was/is the registered owner of Premises. D was the owner of 7 out of 9 units at Nos.52-54 Stanley Village Road, namely, 6 units at No.52 Stanley Village Road (including 4 units which were leased out, Premises and 1 unit on the market) and 3 units at No.54 Stanley Village Road (1 of which was still not leased out).

46. Zee had over 10 years' experience in and was solely responsible for handling all D's tenancy matters. Zee accompanied P and his wife to inspect and re-inspect Premises as arranged by Agent and he also negotiated the terms of the tenancy. During inspection of Premises, P mentioned he had worked for a bank but there were no negotiations between Zee and P then. Agent would not give P's details to D. In fact Agent was a dual agent for P and D and one of its roles was to pass communications between the parties.

47. D required time to carry out works at its expense at Premises pursuant to Rider 9. Zee knew little about P when PTA was signed, so he asked Mok to ascertain whether P was self-employed and to obtain background information on P's company. P received such information on 10th September 2002 by 10/9/02 Letter through Agent.

48. D had its own commonly used FTA form (ie Draft) which it would ask the tenants of its rental properties to adopt as FTA. D had 10 properties on lease at that time and at the height of the market, it might have 20. On 30th August 2002, Zee sent Draft to Agent for P's approval. In his witness statement, Zee said he received Amendments on or about 7th September 2002. He immediately considered them and informed Mok those D would accept and those D would reject. In his evidence, Zee also mentioned 6th and 8th September 2002 respectively as the dates when he informed Mok D's views on Amendments. D's views on Amendments as advised by Zee to Mok were :

(1)	Clause 4 of Draft : Amendments were agreed.
(2)	Clause 5(b) : Zee rejected the inclusion of the words "and all outgoings of a capital nature" because he allowed similar Amendments to Clause 6(b) which showed D as landlord would be responsible for such outgoings. He also disagreed with the deletion of "maintenance fees and all other taxes, assessments" since the suggested duplication of "maintenance fee and repair charges" in Clause 5(i) was narrower due to restriction of such maintenance fees and repair charges to specific items such as air-conditioner, cooker, refrigerator, etc.
(3)	Clause 5(g) : D would have to tell P the relevant cost for recovery under this clause in any event. D would consider allowing P's contractor to carry out the works if such contractor was suitable but preferred to have the final say. If the word "reasonable" was added, P and D might have different interpretations of what "reasonable" cost meant with great likelihood of future dispute. Also, D's final decision might be constrained by the term "reasonable" cost if P put forth a cheaper quotation from an unknown contractor. So, to set P's mind at ease, Zee suggested to Mok to see if P would accept having D provide a few more quotations for consideration instead of providing for "reasonable cost".
(4)	Clause 5(j) : Zee said D had no objection to giving prior notification as it had to have the tenant's consent (whether by telephone, fax or other means) before it could enter the leased premises. P's insistence on written notice reduced efficiency by restricting the mode of communication. Communications by telephone were both usual and useful and Zee's experience was that tenants would telephone him any day of the week if anything happened. Zee told Agent of D's stance. In respect of Amendments to add "reasonable" before the word "cost", Zee gave the same explanation as for Clause 5(g) above.
(5)	Clause 5(m) : Clauses 5(m) and 5(p) gave flexibility to D to give consent to certain acts by P as tenant. D wanted to have the final say but accepted that if a landlord were deliberately obstructive, Clauses 5(m) and 5(p) would not protect the tenant. But Zee said it was important for D (landlord) to have absolute discretion over alterations/changes to the internal partitioning of Premises because a new tenant might not accept such alterations/changes after P left Premises at the end of tenancy.
(6)	Clause 5(p) : As Premises were residential (not commercial) premises, it was reasonable to have the landlord's consent before the tenant could add any lighting/signage or a display of his name. Further, any lighting/signage installation might affect the building or other occupiers or even cause danger (as when the signage was too large). D therefore wished to retain absolute discretion over this matter.
(7)	Clause 6(b) : Both parts of Amendments were agreed.
(8)	Clause 7(b) : The inclusion of the word "reasonable" before "costs and expenses incurred" would add a grey area that might lead to future disputes. Zee told Mok P could propose more concrete requirements, eg that D should provide 3 quotations for P's consideration. Zee understood that Mok had told P of his suggestion but she subsequently replied that P refused his suggestion.
(9)	Clause 7(c) : The last sentence in this clause provided that P could not claim damages for early determination of P's optional rights. In fact, the right to refund of Security Deposit was already preserved in Clause 4 of Draft and Zee did not understand why P/his solicitor would wish to have this Amendment. Zee had explained to Mok that Security Deposit would be refunded to P when he vacated Premises.
(10)	Clause 9 : Although this clause was still applicable to circumstances other than set out in Amendments, Amendments were inconsistent with Rider 10 which ensured that P would remain at Premises for at least 14 months or he would give payment in lieu. Amendments could have the effect of P staying at Premises for 2 days, followed by 2 months' notice and then vacating Premises, causing severe prejudice to D as landlord due to wastage of its investments for the tenancy. It would not be commercially worthwhile for D to agree to Amendments. The actual usable area of Premises was 2,000 sq ft with a roof of about 1,500 sq ft, so D would have to spend a pretty sum under Rider 9 to renovate Premises. D also had to pay Agent's commission of HK$24,400.00. Even in a rising market, Amendments would not necessarily work to D's benefit and D had to assess (a) the extent of the increase in rental, (b) whether D had to incur decoration and other costs before re-letting Premises, (c) any new tenant's background and (d) whether any agency commission was payable. Amendments were in fact for P's benefit in allowing him to vacate Premises earlier although under certain circumstances, it could be a win-win situation for both parties.
(11)	Zee accepted that the inclusion of the word "reasonable" in some parts of Draft was helpful. Clause 4 of Draft referred to "reasonable wear and tear" (which Zee understood to mean fair wear and tear) which was to protect the tenant from unwarranted deduction from the security deposit by an unscrupulous landlord. Clause 5(r) referred to "all reasonable times of the day", which was to protect the tenant from the landlord's insistence on entry to Premises at, say, 2:00 am and to protect the landlord from the tenant's refusal to allow entry during, say, office hours on week-days. However, if the tenant agreed to allow inspection after office hours or during the weekend, it was still permissible.
(12)	In other parts of Draft, the concept of "reasonableness" would create grey areas which might lead to future contention and a multiplicity of disputes throughout the term of the tenancy. In Zee's experience, D's former tenants, even large institutions like the Mass Transit Railway Corporation and solicitors' firm, would not insist on including such uncertain concept. It therefore depended on the circumstances as to whether the word "reasonable" should be included or excluded.
(13)	In summary, Amendments for Clause 9 clearly contradicted PTA. For some of the other Amendments, they could be spelt out more clearly and for yet other Amendments, P would probably understand and not insist on them if he was given proper explanations. D as landlord wanted to maintain Draft. In any event, Zee's experience was that tenants seldom made amendments to Draft and indeed, when D itself rented properties as a tenant, it would seldom amend the landlord's FTA form.

49. Zee had not seen and did not write Written Comments, but Amendments and Written Comments appeared to be written by two persons. Where parties reached agreement on the terms of FTA, generally it was the landlord who would prepare the engrossment FTA. If the amendments were not major, they could be marked on the agreement and initialled by the parties. The agent would first bring the engrossment FTA to the tenant for signature and at the same time collect the deposit or advance rental payment as provided in PTA. Then the agent would deliver FTA (and cheque) to the landlord for his signature. Quite often the parties would sign FTA separately. In this case, there was as yet no consensus as to how the engrossment FTA should be prepared as it depended on the extent of the ultimate changes. In any event, Agent had a clean copy of Draft.

50. D did not receive any further views from P/his solicitor from 6th to 10th September 2002 on Zee's comments on Amendments, which meant that P still insisted on Amendments. D was waiting for P's response between 7th and 9th September 2002. Between 7th and 11th September 2002, Zee had several telephone conversations with Mok who told him that she could not locate P and that P did not respond to her messages for him. When she was able to contact P, P asked her to liaise with his solicitor. But P's solicitor was also very busy and seldom replied to her. Mok told Zee that at one time P's solicitor returned call saying he was on the way to the airport for a business trip, so they could not discuss Amendments.

51. Yet in his witness statement, Zee said that on or about 8th September 2002, Mok informed him that she had negotiated with P numerous times but P still insisted on incorporating Amendments in Draft. Further, when Zee was challenged in cross-examination that he relied on Notes to say that P/his solicitor did not respond to Written Comments between 7th and 9th September 2002, he said he had numerous telephone conversations with Mok and at the end there was no change to P's stance of insisting on Amendments.

52. Zee went on to say in his witness statement that he then informed Mok that all disputed Amendments whether suggested by P or D should not be incorporated, that FTA should be governed by PTA and that P's unreasonable insistence on his Amendments to Draft might render the signing of FTA impossible. Zee explained in evidence that, depending on circumstances, such impossibility might not necessarily come to pass. Zee further informed Mok that D was always ready to sign FTA (ie a version that was acceptable to D) on 10th September 2002.

53. On 9th September 2002, Zee repeatedly chased Agent to follow up on P's Amendments and reminded Agent that P had to pay Sums on or before 10th September 2002. Zee said if no agreement could be reached on FTA by 10th September 2002 but P paid Sums and P did not adamantly insist on all of Amendments, D would consider further discussions with P on the terms of FTA since the rental property market at that time was inactive and D wished to have P as tenant of Premises. But his understanding was that P still insisted on Amendments. Zee pointed out that payment of Sums and the signing of FTA were two distinct matters, so that even if FTA was not signed on 10th September 2002, Sums should be paid as provided in PTA.

54. On 10th September 2002 at around 12:00 noon, Zee received a telephone call from Mok who said P sent 10/9/02 Letter to Agent setting out Request. Zee understood Request was for deferral of both execution of FTA and payment of Sums. Zee immediately asked for a copy of 10/9/02 Letter and the reason for Request. Mok said P had to set up Newco, so he did not have time to take care of FTA. She further said that P could offer Assurance as a condition for Extension. Zee told Mok D would not accept Assurance because it would be difficult to enforce.

55. Zee said 25th September 2002 was not the agreed date under PTA for signing FTA. The Request for Extension would upset D's work schedule for renovation of Premises under Rider 9 as D would have 14 days less to carry out the works, which in turn meant that the works would have to expedited, possibly at increased cost.

56. Zee received 10/9/02 Letter from Mok by fax on 10th September 2002 at around or after 12:00 noon but he could not remember the precise time. He said 10/9/02 Letter did not mention P's new formation of Newco but referred to some progress of incorporation. It also mentioned that Request was made notwithstanding the outstanding documentation questions. The annexure to 10/9/02 Letter set out Newco's background.

57. Later Mok reverted to Zee saying that P was willing to pay a further month's deposit on 11th September 2002, so that the Security Deposit would be increased from the equivalent to 2 to 3 months' rental. Zee then informed Mok that D would agree to Extension subject to P's immediate agreement to Conditions. D was unwilling to grant Request without Conditions (which were not unreasonable), but it would not force P, who initiated Request, to accept Conditions. Mok said she would inform P and obtain confirmation that upon compliance of Conditions, there would be Extension. Mok did not reply to Zee by telephone until about 7:00 pm (Zee had already left the office) when she told Zee that P had agreed to Conditions and that she would shortly fax a confirmation letter to him. On that basis, Zee also confirmed that D had no further changes to make to Draft.

58. Zee returned to the office at about 9:00 am on 11th September 2002 and saw that Agent had sent a fax to him at about 7:28 pm on 10th September 2002 enclosing Side Letter duly signed by P stating that he agreed to postpone the signing of FTA and to pay deposit on 11th September 2002. Zee felt Side Letter could have been better worded by expressly stating details of Conditions and Extension. Zee said he contacted Mok that morning to ask her to state Conditions more clearly in Side Letter when she went to collect the further month's deposit from P that day.

59. When Zee contacted Mok at about 1:00 pm that day, Mok said P/his solicitor had not replied by telephone even though she had left messages for P to return call. Zee also contacted Leung at about 1:00 pm and got the same reply. Then there was the typhoon. At about 2:00 pm, Zee contacted Mok/Leung who said there was still no reply from P. Zee said in his witness statement that when Mok/Leung told him that neither P nor his solicitor could be contacted on 11th September 2002, he immediately said if P failed to pay further deposit, Conditions would lapse and D's right to receive Sums and sign FTA on 10th September 2002 were reinstated. Zee further reserved D's rights.

60. Due to the typhoon, Zee went off work but told Mok/Leung that if P or his solicitor gave any reply, they were to contact him immediately. But throughout 11th September 2002, no one contacted Zee either by land or mobile telephone. He said that irrespective of the typhoon, both P and D should contact Agent to confirm the situation in respect of the above matters.

61. On 12th September 2002, Zee stayed in contact with Leung until about 12:00 noon but there was no reply from P/his solicitor. Leung confirmed to him that throughout 11th September 2002 until around 12:00 noon on 12th September 2002, P did not contact her although P had her mobile telephone number. Mok/Leung also had not received any fax from P. Since there was no reply from P/his solicitor by 12:00 noon that day, Zee decided to forfeit Preliminary Deposit. Zee received a copy fax from Leung to P at about 12:12 pm reminding P of payment of Sums and that D had the right to forfeit Preliminary Deposit. D then issued 12/9/02 Letter to P with copy to Leung stating P's breach of PTA and informing P that D had forfeited Preliminary Deposit.

62. On 13th September 2002, Zee instructed D's solicitors to issue a formal letter to P stating P's breaches of PTA in failing/refusing to sign FTA and to pay Sums on or before 10th September 2002, and informing him that D had exercised its right to forfeit Preliminary Deposit on 12th September 2002 whereupon PTA was terminated. Zee said that D was at all material times ready, willing and able to let Premises to P. D was entitled to forfeit Preliminary Deposit pursuant to P's breaches and Clause 3.

63. After the deal with P fell through, Premises remained vacant for about a year during which time rental fell substantially. Zee said that D in fact did not want to lose P as a tenant, and had hoped to continue to negotiate with P whether before or after P moved into Premises even though FTA could not be signed. D only successfully let out Premises on 1st September 2003 and by then, rental had fallen substantially.

Assessment of the evidence

64. Both counsel in their final submissions made detailed submissions on the credibility or otherwise of P and Zee. I have carefully considered the evidence as well as counsel's submissions and found that most of their evidence does not directly conflict. Most of their communications were made through Mok/Leung, so I have also considered and weighed the possibility of "mis-communication" by Mok/Leung. In this respect, I have borne in mind the fact that Mok/Leung were not called as witnesses and I should not speculate on what they might say on the subject.

65. Mr Chan criticised P for being evasive in answering questions selectively and saying that he had no recollection on a large swathe of crucial matters. On the other hand, Mr Chang submitted that Zee's evidence should be rejected altogether or alternatively treated with the highest degree of circumspection as (a) parts of his evidence were not in his witness statement and only came to light whilst he gave evidence, and (b) other parts of his evidence were tainted by his reference to Notes whilst giving evidence.

66. In my view, both P and Zee are generally honest although there are certain aspects of their evidence that I do not accept. I do find it odd that P failed to recollect the substantive contents of some of his conversations with Mok/Leung and some of his actions during the few key days from 6th to 12th September 2002. I note that P is a man well versed in commercial negotiations and contractual deals. Even on his own case, he found the matter slipping away after he saw Written Comments, something which should have excited his concern. Further, given his personal and financial interest in the matter, I find some of his vagueness and assertions self-serving and unreliable.

67. I see no reason to discard Zee's evidence in its entirety. He gave evidence in a straightforward manner. Apart from the time he had Notes before him (which I shall discuss below) and apart from specific matters which I shall deal with below, I see no reason to doubt the general cogency of Zee's evidence. On careful consideration of Zee's evidence, I do not accept Mr Chang's suggestion that Zee subsequently created Notes as a blatant afterthought because he well knew that Mok would not be called as a witness to rebut his evidence. On the balance of probabilities, I do not consider Zee dishonest. However, he did refer to Notes whilst giving some parts of his evidence although he said it was to a minor degree. In my view, as a result of Zee's reliance on Notes (and he said he could not have remembered some of the details by the time of trial if he did not have Notes) and the impossibility of assessing the contents or veracity of Notes (since they were not produced in evidence), I find certain aspects of Zee's evidence unreliable ("Unreliability Reason").

68. I make the following findings of fact on the balance of probabilities after consideration of the evidence and submissions (save and except the details of Amendments and D's stance on the same which will be dealt with below separately) :

(1)	D was/is owner of Premises. Zee had over 10 years' experience in handling tenancy matters for D.
(2)	When P formerly worked for CAG, he and his family resided at SB Apartment rented by CAG from Kerry Properties Limited. P was placed on garden leave pending severance from CAG after 31st July 2002 but was permitted to remain at SB Apartment until end of October 2002. P planned to set up Newco with some friends.
(3)	Agent was a dual agent for P and D in respect of the subject tenancy.
(4)	In August 2002, P and his wife inspected and re-inspected Premises upon Mok's introduction. At that stage, Zee only knew P had worked for a bank.
(5)	P intended to rent Premises and accepted 28/4/02 Offer by countersigning the same. P did not look for other properties to rent once he started negotiations for the subject tenancy.
(6)	P as tenant, D as landlord and Mok for Agent entered into PTA on 29th August 2002, the main terms of which are set out in paragraph 2 above. P paid Preliminary Deposit to D on the same day. Both P and D knew that PTA was legally binding on the parties.
(7)	The stipulated date under PTA for payment of Sums and for signing FTA was 10th September 2002. The tenancy was to commence on 31st October 2002 to tie in with the end of P's occupation of SB Apartment.
(8)	Upon signing PTA, Zee asked Mok for P's background and Mok in turn asked P for the same. P only gave an outline of Newco to Agent on 10th September 2002 in 10/9/02 Letter.
(9)	On 30th August 2002, Zee sent Draft (ie D's own standard form FTA which was commonly used by D when leasing its own properties to tenants) to Agent who forwarded it to P on the same day.
(10)	P reviewed Draft and consulted his solicitor to whom he also showed PTA. P marked up Draft with Amendments (as set out in italics in paragraph 17) in the presence of his solicitor. Some of Amendments came from P but he consulted his solicitor on most Amendments. P forwarded Draft with marked up Amendments under cover of 6/9/02 Letter. P did not give any reasons for Amendments.
(11)	I find on balance that Zee received Amendments from Mok on 7th September 2002 and after studying them, he orally reverted to her on the same day. Apart from Amendments in respect of Clauses 4 and 6(b) of Draft which he accepted, Zee rejected the other Amendments. I note that Zee in his witness statement said that he received Amendments on 7th September 2002, considered them immediately and informed Mok the ones he would accept and the ones he would reject. P said in evidence he received Written Comments on 7th September 2002 as well. Therefore, I conclude on the balance of probabilities that it was unlikely that Zee informed Mok of his views on Amendments on 6th or 8th September 2002.
(12)	On the balance of probabilities, I do not accept that Zee told Mok that in respect of P's Amendments for "reasonable" costs, P could consider the alternative of requiring D to provide 3 quotations for his consideration in place of the uncertainty that might arise on determining "reasonable" costs. I do not find Zee dishonest but due to (a) Unreliability Reason, (b) the lack of other evidence to support such contention and (c) P's evidence that no such message was conveyed to him, I find that I cannot give weight to Zee's evidence in this respect.
(13)	For the same reasons as set out in sub-paragraph (12) above, on the balance of probabilities, I also do not accept Zee's evidence that he told Mok that the right to recover Security Deposit was already covered by Clause 4 of Draft and thus there was no need for Amendments to Clause 7(c), and that Mok subsequently confirmed to him that she had so told P.
(14)	I find on balance that on 7th September 2002 Mok faxed to P Written Comments, which accepted Amendments for Clause 4 of Draft and for inclusion of the words "and Rent" in Clause 6(b) but rejected other Amendments. I further find that Zee did not write Written Comments and in all probability Agent/Mok wrote them as being Agent's interpretation of Zee's views. In the circumstances, Written Comments did not perfectly match Zee's views. I find that Zee had accepted the inclusion of the phrase "and all outgoings of a capital nature" in Clause 6(b) but Agent/Mok noted this as not agreed in Written Comments.
(15)	Between 7th and 10th September 2002, P was not asked about and did not volunteer any explanation for the 3 vertical lines he marked next to Clause 5(i). He also did not seek clarification from D through Agent as to the meaning or reasons for Written Comments, eg what was meant by "hard to define" in relation to the proposed inclusion of the word "reasonable".
(16)	Zee chased Agent to follow up on Amendments with P on 9th September 2002. He was keen to have P as tenant given the inactive rental market at the material time and he was even prepared to further discuss the terms of FTA after 10th September 2002 so long as P was prepared to pay Sums on that day and did not adamantly insisted on all Amendments. But such thoughts by Zee were not communicated to Agent/P.
(17)	P initiated Request for Extension by sending 10/9/02 Letter to Agent on 10th September 2002 and asking Agent to seek D's consent. Mok telephoned Zee at around 12:00 noon on 10th September 2002 and told him of Request which Zee understood to be a request for deferral of both the time for execution of FTA and payment of Sums. Zee asked Mok for a copy of 10/9/02 Letter.
(18)	I find on balance that although P did not expressly put forward the fact that he was busy with Newco as the reason for Request, Mok so interpreted 10/9/92 Letter and informed Zee. Mr Chang argued that Zee's evidence to the effect that Mok told him Request was needed because P was busy with Newco should be discarded altogether as an afterthought tainted by P's reference to Notes whilst giving evidence. I have borne in mind the concern with Notes. However, I note that 10/9/02 Letter dealt with (a) P's background and Newco and (b) P's Request for Extension, and stated that Request was made "notwithstanding" the outstanding documentation questions. I find on the balance of probabilities that it was likely that Mok assumed that (a) and (b) were inter-linked and so informed Zee.
(19)	I further find that P only mooted the possibility of Assurance with Mok, but Mok interpreted this as an offer of a condition for Request and so informed Zee. Again, Mr Chang asked me to reject Zee's evidence on this point for similar reasons as set out in sub-paragraph (18) above. However, I note that neither party raised the matter of Assurance prior to Zee giving evidence on the same. Since P agreed he actually mooted this option with Mok, Zee could not have known of this unless Mok informed him. I therefore find on the balance of probabilities that Mok told Zee of this option as P's offer of a condition for Request.
(20)	I find on balance that up to the time when P sent 10/9/02 Letter to Agent, he had not given any response on Written Comments. Indeed, 10/9/02 Letter and also P's evidence were silent on this. In light of this and the finding in sub-paragraph (15) above, I find that Zee properly concluded at this stage that P had not given up any of Amendments. Had P made any response to Written Statements, I am of the view that more likely than not he would have addressed them in 10/9/02 Letter or separately in writing to Agent. P all along has not been shy of making his views known in writing (see Amendments and his correspondence with Agent). Alternatively, given that Written Comments had already been sent to P for his consideration, he could have asked Agent to arrange for a meeting with D to make his response known and to discuss/finalise terms of FTA. I accept that P was not obliged to call for a meeting, but given P's professed commercial experience in negotiating numerous contracts and his knowledge that such matters were best resolved by a meeting with D, I find P's lack of such proposal to Agent suggested that he had not responded to Written Comments.
(21)	I find that between 7th and 9th September 2002 Zee was waiting for P's response to his comments on Amendments. On balance I do not accept Zee's evidence that between 7th and 10th September 2002 Mok told him she could not locate P who did not return her calls or when she did locate P, he told her to liaise with his solicitor. I also do not accept Zee's evidence that Mok told him P's solicitor was busy and about to go on a business trip, so Amendments could not be discussed. I find that I am unable to attach weight to such evidence due to (a) Unreliability Reason and (b) its contradictions with other evidence. Quite clearly, Mok was able to contact P on 10th September 2002 and had 2 meetings with him (see below). I also note that Zee said in his witness statement that Mok told him on 8th September 2002 that P still insisted on Amendments after numerous negotiations. I also do not place weight on such evidence as a result of its conflict with the above evidence from Zee. As a corollary to that, I also do not accept Zee's evidence that due to P's insistence on Amendments, he consequently told Mok that all disputed Amendments should not be incorporated and that FTA should be governed by the terms of PTA. Even if Zee so told Mok, there is no evidence that Mok conveyed Zee's stance to P.
(22)	I accept on balance that 1st Meeting attended by P, his wife and Mok at SB Apartment on 10th September 2002 was subsequent and a reaction to 10/9/02 Letter. I further find that the focus of 1st Meeting was on P's Request and how to seek D's consent for the same, so P eventually at 1st Meeting offered or volunteered Concession. I further find on balance that at 1st Meeting P and Mok did not discuss Amendments or Written Comments.
	I note that P said in evidence he did not recall whether documentation issues were discussed and he only thought they might have discussed such matters because FTA documentation was in issue. He also said he did not know whether Mok was empowered or qualified to discuss the terms of Draft or whether she was a mere messenger for conveying comments between the parties. I am not impressed with the vagueness of P's evidence. P did not even remember whether Mok telephoned D during 1st Meeting. I am of the view that had there been discussions on Amendments or Written Comments or on how to resolve P and D's differences on Draft, such matters being the key contention between the parties would have impressed on P's mind, just as the discussion of Request and the offer of Concession did. I therefore find that at 1st Meeting P and Mok concentrated on Request because it was thought that if P successfully obtained Extension requested, the documentation issues could be resolved subsequently.
(23)	On the balance of probabilities, I do not accept that on 10th September 2002 P felt bullied or coerced into making offer of Concession. There is no satisfactory evidence that P was unable to consult his solicitor or suffered any obstacle between 7th and 10th September 2002 that prevented him from responding to Written Comments or explaining why he required Amendments or suggesting a meeting with D/Agent to resolve the outstanding matters or (if he so wished) informing D via Mok that he would be standing on the terms of PTA. There is also no satisfactory evidence as to why, with P knowing D had responded with Written Comments and further knowing that 10th September 2002 was the deadline for signing FTA, he did not bring the matter further from 7th to 10th September 2002. After all, his stance all along was that he wanted to proceed with the deal. I accept that Mok did remind him of the consequences of not meeting obligations under PTA on 10th September 2002, but that is a far cry from bullying or coercing P into offering Concession, especially to a former banker well versed in commercial negotiations. P also confirmed that there was no specific demand from D for Concession.
(24)	I find that Mok later brought draft Side Letter to P at SB Apartment at 2nd Meeting on 10th September 2002. I further find that Mok did not confirm to P D's acceptance of Request and Concession at 2nd Meeting. Rather, it was intended at 2nd Meeting that Side Letter be endorsed by P and put to D for consideration and acceptance. P therefore signed Side Letter at 2nd Meeting and his understanding at that time was that he made Request, which was pending consideration and reply by D.
	On balance I reject P's evidence that when he signed Side Letter, the signing of FTA was already postponed. Such contention is contrary to other evidence. D had not signed Side Letter then and Mok had not told P that D had agreed to Request for Extension. P knew that Side Letter (once signed by him) was to be sent to D for consideration and this was yet to be done. P admitted that at that stage he did not know the terms of the extension or the extended deadline for signing FTA. P throughout his evidence also insisted that Extension would only become definite when both parties signed Side Letter and he would not regard D as having agreed to Request without seeing D's signature on Side Letter. Indeed, this was the very reason he did not pay the further month's deposit on 11th September 2002.
(25)	I find on the balance of probabilities that Mok did on 10th September 2002 inform Zee of P's willingness to pay a further month's deposit. Zee's view at that time was that he could have rejected Request outright by reason of the length of Extension requested and because of the shortened period for D to carry out renovation works under Rider 9. Zee then told Mok that D would agree to Request if D satisfied Conditions. Mok told Zee that she would inform P and obtain his confirmation on Conditions. I also accept that Mok eventually indicated to Zee that Conditions were agreed by P. On the other hand, I also accept P's evidence that Mok/Agent never informed P of Conditions.
	In my view, it is unlikely that Conditions were an afterthought by Zee. Conditions were expressly referred in 12/9/02 Letter, which was issued only 2 days later, and as such untainted by Unreliability Reason. Also P on receipt of 12/9/02 Letter could easily have sought immediate verification from Agent. On the other hand, I also do not see any sufficient reason for me to disbelieve P's evidence that he had not heard of Conditions before receipt of 12/9/02 Letter. It is quite clear from the evidence that P, on his case, still insisted (at the very least) on Amendments requiring the inclusion of the word "reasonable". It is unlikely that P would have refrained from making objection if he knew of Conditions. I need not and should not speculate on the reasons for the mis-communication. It may well be that it was hoped that the deal would be kept alive by P paying the further month's deposit on 11th September 2002 for Extension and things would hopefully resolve themselves before 25th September 2002. But, as I say, I need not come to any conclusion on this matter.
(26)	I find on balance that Agent faxed Side Letter as signed by P to D on 10th September 2002 but Zee only saw it when he returned to the office on 11th September 2002. For the same reasons as set out in sub-paragraph (12) above, I do not accept Zee's evidence that he told Mok to get P to state clearly in Side Letter the terms of Conditions when she went to collect the further month's deposit that day.
(27)	I find that even on 11th September 2002, P did not yet know whether D had agreed to Request and Concession. This was reflected by P's evidence that he had not checked with Agent on this since he considered that, having made Request and offered Concession, the onus was on D/Agent to revert to him.
(28)	I further find on the balance of probabilities that as at 11th (and even on 12th) September 2002, P's stance was that he still wished to make Amendments. In any event, P could not remember the contents of his telephone conversation with Leung and I find on balance that he had not expressly made known to Agent/D that he would abandon all Amendments other than the inclusion of the word "reasonable". When P was asked whilst giving evidence when he mentioned his willingness to abandon other Amendments, he said he did so whilst in court. Further, P said in his witness statement that he had continued to negotiate with Leung and Mok "indicating his desire to make the Amendments in [Draft]" as shown in his correspondence with Agent. He went on to point out in his witness statement that "[P] did not agree to sign [FTA] without the Amendments" (not just Amendments on "reasonableness"). I therefore find on balance that P was not in the frame of mind to let Amendments other than Amendments on "reasonableness" go on 11th September 2002 (although Amendments on "reasonableness" was particularly important to him). Any suggestion otherwise in P's evidence I find on balance to be subsequent self-serving statements which are therefore unreliable. I do not agree, as submitted by Mr Chang, that any reader of 11/9/02 Letter would understand that P was implicitly abandoning the other Amendments. What P did was simply to highlight the importance of Amendments on "reasonableness". P was well versed in the English language and an experienced negotiator of commercial contracts. If he were in that frame of mind, there is no reason why he was unable to make his position clear in a simple straightforward manner.
(29)	Typhoon signal no.8 was hoisted from 1:40 pm on 11th September 2002 to 1:40 am on 12th September 2002. I accept P's evidence that he was unable to contact his solicitor or Agent, and conversely Agent was unable to contact P during that period of time, but P could contact others in the morning. But P was able to and did issue 11/9/02 Letter to Agent and I have found there was no retraction of any of Amendments by P in that letter. I find also that P made no enquiries about D's execution of Side Letter and acceptance of Request in the morning on 11th September 2002. P said he had communications with Agent on 11th September 2002 but was unable to give particulars of those communications. Given that the outcome of Request must have been important to P, I find that it more likely than not that he would have recalled the matter had he chased up Agent on the same or had there been other communications with Agent in respect of Request/Side Letter.
(30)	I accept that Zee kept in contact with Mok/Leung on 11th September 2002 until about 2:00 pm and was informed that they could not contact P. He told Mok/Leung that Conditions lapsed but took no action that day. Zee did not receive any further call from Mok/Leung throughout 11th September 2002.
(31)	I find that in all probability P had received the fax from Leung dated 12th September 2002 in the same morning. Although P could communicate by land and mobile telephone in the morning of 12th September 2002, he did not check with Agent on the status of Request and Side Letter. He was unable to give any satisfactory reason for his non-action and indeed he said in evidence he could not recall why he did not do so. I find that P knew the obligations under PTA to be performed on 10th September 2002 were binding on him until D agreed to Request/Side Letter, and that as at 12th September 2002 PTA was still effective and not at an end. In my view, P also well knew that as at 12th September 2002 Request/Side Letter/Concession were only proposals on his part which were not yet accepted or agreed to by D. This was clearly reflected by his refusal to pay the further month's deposit under Concession until he had evidence of D's acceptance by signing on Side Letter.
(32)	On 12th September 2002, Zee kept in contact with Leung until around 12:00 noon. Leung told him that P had not contacted Agent. Zee received a copy of Leung's fax to P dated 12th September 2002. He then decided to and did issue 12/9/02 Letter to P and forfeited Preliminary Deposit.
(33)	I accept that P first knew of Conditions upon receipt of 12/9/02 Letter and he did not agree to Conditions. P said in evidence that his state of mind then was to give up Amendments other than inclusion of the term "reasonable" but I find that such state of mind, even if true, was not communicated to Agent/D. Further, there is no evidence that P informed Agent/D of his objection to Conditions on 12th September 2002 or shortly thereafter, and I find that he did not do so.
(34)	D's solicitors issued a formal demand letter to P on 13th September 2002 inter alia recording that P breached PTA in failing/refusing to sign FTA on or before 10th September 2002 and to pay Sums.

Implied terms

69. Mr Chang submitted that the guiding principle on whether Terms ought to be implied in PTA could be found in Kensland Realty Ltd v Whale View Investment Ltd & anor [2001] 4 HKCFAR 381, 392 which cited BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) ALJR 20, 26 on the conditions for implying a term in a contract :

"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

70. Mr Chang submitted that since PTA did not provide for any obligation in relation to the execution of FTA apart from the date of execution and Clauses 3 and 4, Terms were necessary to give effect to PTA. It was suggested that Terms were also for business efficacy as it was common in the business arena to have mutual co-operation during negotiations for working out contractual terms (The Moorcock (1889) 14 PD 64, 68) and that the court should readily imply a term of co-operation to ensure performance of both parties' bargain (Mackay v Dick & anor (1881) 6 App Cas 251 as affirmed in Evans v SMG Television & ors [2003] 3 All ER (D) 348 (Jun) (unreported, 26th June 2003, Lexis transcript)). Lord Blackburn in Mackay's case (supra at p.263) said :

"I think I may safely say, as a matter of general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on the circumstances." (emphasis added)

Mr Chang also referred to Lightman J's judgment in Evans' case (supra at para.192) where he said that "there are a large number of relationships in which the law conventionally implies particular types of term. In particular in contracts which require cooperation between the contracting parties in order to ensure performance of their obligations and the enjoyment of their rights, the law is quick to imply a cooperation term ......" However, I note that in the same paragraph Lightman J went on to say that "the duty of cooperation is determined not by what is reasonable but by the obligations imposed by the contract itself ......" (emphasis added) This is echoed in Chitty on Contracts (28th ed 1999) para.13-011 at p.649.

71. I accept that under PTA both P and D have an implied duty to co-operate to ensure the performance of their bargain ("Implied Term"). However, I do not accede to Mr Chang's interpretation of that duty. In his written submissions, he submitted inter alia that :

(1)	neither party should sit back and do nothing;
(2)	neither party should adopt a dismissive/unco-operative attitude in refusing to consider the other party's proposal and letting time lapse;
(3)	"if more time was needed for the parties to iron out their differences, then parties should then attempt to liaise to extend the due date for signing of [FTA]";
(4)	"both parties [should] act reasonably to give effect to, and to ensure performance of [PTA], including executing [FTA] and renting Premises".

72. In respect of paragraph 71(1) above, I agree that neither P nor D should sit back and do nothing about FTA but it is not an applicable scenario in this case. In the present case, D tendered Draft for P's consideration, P responded with Amendments and D reverted with comments on Amendments which P received indirectly through Agent as Written Comments. It is certainly not a case where P or D did nothing about FTA. In respect of paragraph 71(2) above, other than Mr Chang's submissions on the reasonableness of Amendments and D's alleged wholesale rejection thereof (which I will consider below), I find that neither P nor D refused to consider the other party's proposal. P consulted his solicitor and formed his views on Draft in form of Amendments. Zee also considered and reverted to Agent on each and every Amendment that was put forward. Agent also put forward Written Comments to D. It is certainly not a case of outright refusal to consider the other party's proposal.

73. I also do not accept Mr Chang's contentions in paragraphs 71(3) and (4) above. He submitted that the duty of co-operation at least implied that both parties "would not act unreasonably in the negotiation of the final terms of [FTA]". However, this is different from the pleaded 1st Term (which provides inter alia for taking "necessary" steps to ensure performance of PTA) and from the authorities (including Mackay's case (supra), Evans' case (supra) and Chitty on Contracts (supra) above). As explained in Chitty on Contracts (supra), the duty to co-operate "is to be determined, not by what is reasonable, but by the obligations imposed ...... upon each party to the agreement, and by the surrounding circumstances". As will be seen in my analysis below, I find that the concept of reasonableness as propounded by P has no room in the present case. It also does not ipso facto follow that both parties taking all necessary steps will inevitably result in agreement on the terms of FTA. Where the parties cannot agree on the terms of FTA and there is no repudiatory conduct, the law permits either party to enforce PTA as an open contract. But more of that below.

74. Mr Chang drew an analogy with the situation of giving "good title" under a contract for the sale and purchase of land by referring to Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109, 117 where Litton NPJ said that the court would adopt the stand-point of "a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain" (emphasis added). Hence, it was argued that both parties had to co-operate with each other for PTA to be workable and for Premises to be successfully rented out. I am, however, doubtful whether Mexon Holdings Ltd's case (supra) is relevant to the issue at hand, namely, to determine under what circumstances Terms can be implied into PTA. In Mexon Holdings Ltd's case (supra), the vendor's express obligation under the agreement was to show a good title to the property and there was no question of any implied term. The issue in that case was the meaning of "good title" and Litton NPJ's aforesaid comment was given in that context.

75. I see no justification for implying 2nd Term into PTA. Chitty on Contracts (supra at para.13-012 at pp.649-650) states as follows :

'By the same token, "if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances under which alone the arrangement can become operative." Also where a binding contract is subject to a condition precedent, a term may be implied that a party will not do an act which, if done, would prevent fulfillment of the condition. ......'

In the present case, the execution of FTA on 10th September 2002 is neither an existing state of circumstances nor a condition precedent. In my view, Implied Term is sufficient in the light of the provisions in PTA and the surrounding circumstances. However, in any event, given my conclusions below on Amendments, there is no breach of 2nd Term by D even if the same can be implied in PTA.

Role of Agent

76. From the above findings of fact, it is clear that there have been "mis-communications" between P and D in that P's stance was differently conveyed by Agent to D and vice versa. An issue then arises as to the capacity and role of Agent in passing communications between the parties. I have particularly invited counsel to address this issue in their final submissions.

77. Clearly, Agent was a dual agent for P and D in respect of the subject tenancy. Mr Chan submitted that the court should look at the intention of the parties. He argued that as Agent was a dual agent, Agent should be treated as such for both parties in relation to its role in passing communications between the parties. Mr Chang submitted that at most Agent was a mere messenger or conduit of communications between the parties. Its duty was to kept its principals (ie both P and D) informed about matters which were of concern to them. Mr Chang said that Agent and Mok/Leung had no actual, ostensible or apparent authority to negotiate the terms of FTA or to enter into any agreement on behalf of P/D.

78. Neither counsel cited any legal authority on this issue. Deputy High Court Judge S Kwan (as she then was) succinctly summarised the position in Yili Concepts (HKG) Limited v Lee Wai Chuen & anor HCA12911/1997 (unreported, 29th September 2000) when she said as follows :

"It is a fact in each case whether an estate agent is authorised by and therefore acting for a particular party in providing information relating to a property to another party. Although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction."

In Cheng Kwok-fai v Mok Yiu-wah, Peter & anor [1990] 2 HKLR 440, in respect of a provisional agreement for the sale and purchase of land, Godfrey JA said at p.445 that :

"...... An agent in Hong Kong acts as a broker, usually, though not always, taking "commission" from both vendor and purchaser. No doubt, in some cases even in Hong Kong, a misrepresentation made by an agent to a purchaser will, on the facts, be held to have been made on the vendor's behalf."

It was held on the facts of that case that the agent did not have actual or ostensible authority of the vendor to supply the purchaser with a sketch of the property from the agent's own records. In doing this, the agent was acting on behalf of the purchaser and not the vendor.

79. For the purpose of the present case, I am prepared to assume and accept Mr Chang's contentions that legally speaking, Agent is merely a messenger in passing communications between the parties although I have found that Agent/Mok sometimes went further by purportedly making offers to or agreements with a party on behalf of the other party.

Repudiation

80. As Agent is only a messenger without authority to enter into any binding agreement, there is no basis, without D's signature to Side Letter and/or D's agreement to Request for Extension, for P to assume/conclude that D accepted Request or Concession on 10th, 11th or even 12th September 2002. The unaccepted offer of Request/Concession is not binding on the parties. I have found that P knew that Request/Concession had not yet been accepted and that he knew that PTA and the obligations therein (ie including the signing of FTA and payment of Sums on 10th September 2002) were still binding on him. There is therefore no estoppel in P's favour (at least from P's perspective) by reason of inactivity or silence by D. It also flies in the face of fundamental contractual principles to say that an unaccepted offer to vary contractual time stipulation by postponement forthwith extends time in favour of the offeror when it is and to the knowledge of the offeror still pending acceptance by the offeree. I will deal with the issue of Amendments below. Suffice to say here that (a) I reject P's arguments that D's rejection of most Amendments is a repudiatory breach of PTA and/or Implied Term, and (b) I find (at the very least) P's insistence and/or non-withdrawal of Amendments in relation to Clause 9 and failure to pay Sums repudiatory.

81. The parties agree and it is the law that time is of the essence for the performance of obligations under PTA (see Wong Wai Chi Ann & anor v Cheung Kwok Fung Wilson & ors [1996] 3 HKC 287). By refusing to pay Sums and/or refusing to sign FTA consequent on insistence/non-withdrawal of Amendments in relation to Clause 9 on the stipulated date (see analysis below), P was in repudiatory breach of fundamental provisions of PTA, which breach was liable to be accepted by D.

82. I further find that the provisions in PTA to pay Sums on 10th September 2002 and to sign FTA on the same day are disjunctive. Mr Chang submitted that the obligation to pay Sums must be part and parcel of the signing of FTA and P could not be faulted for failing to effect payment when the terms of FTA were yet to be agreed. He cited no legal authority in support of his contention. In Choi Siok Pin & anor v Lui Bing Bing Betty [1994] 3 HKC 675, the provisional agreement for the sale and purchase of land provided that both purchaser and vendor should attend their respective solicitors to sign a formal agreement for sale and purchase on or before 10th January 1994. It further provided that a deposit of HK$135,000.00 be payable to the vendor's solicitors on or before 10th January 1994. Similar to the present case, there was no provision in the provisional agreement tying the payment of the further deposit to the signing of the formal agreement. In that case at pp.681-682, Cheung J (as he then was) drew a distinction between such provision from other provisional agreements which provide for the payment of the further deposit to be made upon signing of the formal agreement on a certain date. The learned judge went on to say at p.682 that :

"In the present case the further deposit of $135,000 was to be paid on the same day of the signing of the formal agreement although the payment was not dependent on the signing of the formal agreement. The payment of the deposit and the signing of the formal agreement were independent obligations that must be performed on 10 January 1994."

Although Zee said he understood by Request P asked for a deferral of the requirements for both signing FTA and payment of Sums, Request is but an unaccepted offer to vary existing contractual terms and is not part of the binding provisions of PTA. I therefore find that P by either failing to sign FTA consequent on (at the very least) insisting on or not withdrawing Amendments in relation to Clause 9 (see analysis below) or to pay Sums or both on 10th or even up to 12th September 2002 amounts to a repudiation of PTA.

83. The next issue is whether such repudiation has been accepted or properly accepted. D claimed that such repudiation was accepted by 12/9/02 Letter and forfeiture of Preliminary Deposit and, presumably, at the latest by the letter from its solicitors dated 13th September 2002, which P received. I have found that Mok failed to inform P of Conditions but told Zee P had accepted Conditions, so P's non-payment of the further month's deposit on 11th and 12th September 2002 led D to conclude that Conditions for Extension lapsed. For different reasons, both P and D were of the view or knew that there was no effective extension of time, and to both of them the obligations under PTA remained binding. Hence D issued 12/9/02 Letter and forfeited Preliminary Deposit. Mr Chang submitted that D was unreasonable in imposing Conditions (including the condition prohibiting any Amendments) and he went so far to say that even when P offered Concession, D should have acceded to Request unconditionally. As explained below, I am not concerned with the reasonableness or otherwise of D's conduct but with whether it had repudiated PTA or failed to complete the deal in the manner set out in PTA. It is clear from the aforesaid analysis that P never knew of Conditions before 12/9/02 Letter and as Agent was a mere messenger, there is in fact no binding agreement between P and D on Conditions. So, even more so than Concession, Conditions had no legal effect and could not support any estoppel argument.

84. In light of the above, the ground(s) for accepting repudiation and for establishing a failure to complete the deal in the manner set out in PTA as set out in the letter from D's solicitors to P dated 13th September 2002 and in D's pleadings are correct. The issue is whether D is now precluded from relying on its acceptance of P's repudiation because of the reference to the purported agreement in respect of Conditions in 12/9/02 Letter. "The general rule is well established that, if a party refuses to perform a contract, giving therefore a wrong or inadequate reason or no reason at all, he may justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal" (Chitty on Contracts (supra at para.25-013 at pp.1229-1230). On my findings of fact, Conditions never exercised P's mind prior to his receipt of 12/9/02 Letter, and even as at 12th September 2002, he would not sign FTA without Amendments and would not pay Sums or the further month's deposit without having sight of D's signature to Side Letter. In any event I also note that Chitty on Contracts in the same paragraph went on to say that there does not appear to be any separate principle which would preclude a party from setting up a different ground simply because it would be unfair or unjust to allow him to do so.

85. On the other hand, Mr Chang argued that instead it was D who was in repudiatory breach of PTA because (a) it unreasonably failed to extend the deadline for signing FTA and (b) it imposed Conditions which included a requirement that there be no further Amendments. However, neither (a) nor (b) was pleaded.

86. Further, as regards (a), both parties agreed that the time for performance of the obligations under PTA was of the essence. Unless the parties agree to Extension, such obligations stand and are not varied. Further, it is neither expressly nor implicitly necessary for PTA to require either or both parties to extend the deadline because if no agreement can be reached on terms of FTA, either party is entitled to enforce PTA as an open contract. But again, more of that below.

87. As regards (b), as explained above, Conditions not having been communicated to P are ineffective and did not exercise P at all. Further, even if Conditions were communicated to P and are by themselves repudiatory, it does not follow that D should be precluded from accepting P's repudiatory breach(es). Until D's repudiatory breach has been accepted (and P only first attempted to do so on the ground of failure to agree FTA and not for the imposition of Conditions in his solicitors' letter of 18th September 2002), the primary obligations of both parties remain unaffected and hence either P or D is entitled to accept the other party's breach (which D did by 12/9/02 Letter and forfeiture of Preliminary Deposit and/or its solicitors' letter of 13th September 2002) (see Chitty on Contracts (supra at paras.25-014 - 25-015 at pp.1230-1231) and State Trading Corporation of India Ltd v M Golodetz Ltd (now Transcontinental Affiliates Ltd) [1989] 2 Lloyd's Rep 277, 286, a case cited by Mr Chan).

88. Mr Chang then argued that D acted unreasonably in failing to ascertain P's position at least on 12th September 2002 first before "pulling the rug" by 12/9/02 Letter when P could not be contacted on 11th September 2002 due to the typhoon problem. I have found as a fact that Zee kept in contact with Agent for the morning of 11th September 2002 (when P should be contactable) and for the whole morning of 12th September 2002 and he only issued 12/9/02 Letter after there was no response from P and after he received copy fax from Agent to P of the same day. No matter that the tenancy was due to commence only by the end of October 2002 and D might still have adequate time to carry out renovation works under Rider 9, they are not sufficient reasons to prohibit D's acceptance of P's repudiation. I see no absolute requirement, as suggested by Mr Chang, in face of P's repudiation for D to go the extra mile by exploring the possibility of P's willingness to bear the added costs or waive D's performance of its duties under Rider 9 and to continue negotiations with P to save the tenancy from falling through.

89. In the circumstances and in light of my analysis on P's arguments on Amendments below, I find P is in repudiation of his obligations in PTA, which repudiation was accepted by D.

Reasonableness of Amendments

90. Mr Chang submitted that an objective assessment by the court of the reasonableness of Amendments played an important part in the finding of fault. P's primary contention was that all Amendments were reasonable especially in light of P's proposal to include the word "reasonable" in some clauses of Draft. As corollary to that proposition, Mr Chang argued that D's wholesale rejection of Amendments (as clearly reflected in D's imposition of Conditions including the requirement that no further amendment be made to Draft) was necessarily unreasonable and a repudiatory breach of Implied Term. Mr Chang submitted that the court should not be concerned with the subjective mens rea of the parties at the material time, yet he said the court might see fit to take into consideration both parties' explanation/rationale to see if such explanation offered another objective dimension/perspective to Amendments, and the rejection thereof. He noted that neither P nor D communicated their reasoning for the inclusion/rejection of Draft/Amendments to the other.

91. In my view, P's contentions are premised on a wrong footing and contrary to fundamental principles of contract. It is trite that a contract must be the parties' bargain and the court cannot write, amend or re-write the contract for the parties. The court cannot imply a term into a contract on the ground that it is reasonable nor can the court place itself in the position of the parties with all their respective negotiation strengths/weaknesses to work out the terms for each given set of contractual parties and circumstances. It is a wholly different scenario where the parties have actually come to an agreement and the court is called upon to determine whether terms can be implied into the bargain as made or to interpret the meaning of express or implied terms.

92. Here, PTA provided for the signing of FTA and as at the signing of PTA, the terms of FTA have yet to be negotiated between the parties. The starting point is that PTA is a contract that stands on its own and is specifically enforceable at the suit of either party as an open contract. Although it provides for the signing of FTA, neither side is entitled to demand that the other party enter into it. Godfrey J in Man Sun Finance (International) Corp v Lee Ming Chung Stephen [1993] 1 HKC 113, 124 said as follows :

"...... But on the basis that ...... the signing of the [provisional agreement] brings into existence an immediately binding agreement, it does so on the terms it expressly contains and, otherwise, on the terms of what the law describes as an 'open contract'. From the moment the ink is dry on the parties' signatures, all references to the formal sale and purchase agreement are illusory ......

I do not know how the parties would react if they were told that the signing of the formal sale and purchase agreement was a pure formality to which they were not entitled and which could safely be ignored. I suspect they would be astonished. Yet such is said to be their intention; at any rate in those cases where it is agreed or held that what the parties have done is to enter into an immediately binding contract."

(see also D H Shuttlecocks Ltd v Keung Shiu Tang [1993] 2 HKC 600 which was overruled on another point).

93. As neither P nor D can insist on entering into FTA, if there is no agreement on terms of FTA and if there is no repudiatory conduct by either party, PTA can simply be enforced as an open contract. This illustrates (and as will be seen below) that failure to come to terms on FTA does not necessarily equate to repudiatory conduct. In the context of the parties' negotiations, there may well be a spectrum of (rather than a single position on) terms/amendments that is not unreasonable or repudiatory. The true issue is whether D in proposing/maintaining its position on Draft and its comments on Amendments and P in proposing/maintaining its position on Amendments amount to evincing an intention to repudiate PTA, and not whether one party is proposing reasonable or unreasonable (so long as it is not repudiatory) terms for FTA.

94. Mr Chang relied strongly on Chu Wing Ning v Ngan Hing Cheung & anor HCA No.A9409/1991, Deputy Judge Ribeiro QC (as he then was) (unreported, 6th November 1992). In that case, the purchaser and the vendor entered into a provisional sale and purchase agreement in respect of a property. The purchaser's solicitors forwarded a draft formal agreement to the vendor's solicitors. On the day when the formal agreement was to be signed, the purchaser's solicitors discovered the registration against the property of another sale and purchase agreement to a third party. The purchaser's solicitors tendered the relevant deposit by asking the vendor's solicitors to stakehold the same pending their review of the agreement in favour of the third party. The purchaser insisted on a cancellation agreement being signed and registered before proceeding, and amended the draft formal agreement accordingly. The vendor refused and claimed that the purchaser was in breach by failing to sign the formal agreement. The vendor then forfeited the deposit and treated the provisional agreement as discharged.

95. The learned judge said that "...... the governing principle must be that each party is entitled to have inserted in the formal agreement all the terms which the Provisional Agreement expressly or by necessary implication contains - but no others (unless by mutual consent) ......". He went further to say as follows :

"Where a party presses for a term which does properly reproduce or reflect a provision agreed as part of the provisional agreement but where the other party rejects inclusion of that term, then it is clear that the original party is able to fall back upon the Provisional Agreement and enforce it as an open contract : Link Brain v Fujian Finance Co Ltd [1990] HKLR 353 (CA). The intended subsequent agreement was to make formal and express what had been informal and perhaps only implied. Failure to achieve the desired formality does not affect the contractual rights and obligations already in place by virtue of the underlying provisional agreement

......

The position is obviously different where the parties fail to agree the contents of the formal sale and purchase agreement because one of them is insisting on terms being inserted which go entirely beyond what had been expressly or impliedly agreed in the Provisional Agreement. In such a case, a continued insistence on such extraneous terms may constitute a repudiation of the Provisional Agreement which the other party may accept, bringing the contract to an end. The party insisting on the new term cannot, on such failure to reach agreement, merely fall back onto the Provisional Agreement and seeks its specific performance. The repudiation having been accepted, nothing remains to be enforced." (emphasis added)

Since the purchaser in that case insisted on a term to be introduced to the sale and purchase agreement which gave effect to a non-existent term in the provisional agreement, the purchaser's conduct amounted to a repudiation of the provisional agreement.

96. Mr Chang submitted that by parity of reasoning, D's insistence on rejecting almost all P's reasonable Amendments evinced D's intention not to enforce PTA and as such constituted wrongful repudiation. However, this is not what the judgment said. The learned judge said that repudiation may arise upon insistence of terms extraneous to the provisional agreement, not upon refusal of reasonable amendments to a draft provisional agreement or even insistence on unreasonable terms (unless they are extraneous to PTA so as to evince an intention to repudiate).

97. A succinct summary of what amounts to repudiation can be found in the judgment of the court by Stock JA in Lau Chun Ming v Ma Koon Sik CACV705/2001 (unreported, 4th October 2001) :

"The principles are clear enough. A refusal to perform a contract may be inferred from conduct, but: "It must not be forgotten that repudiation of a contract is a serious matter, not to be lightly found or inferred": see Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co [1943] All ER 60, 71. It may be inferred where a party has "acted in such a way as to lead a reasonable person to conclude that [the party allegedly in breach] did not intend to fulfill his part of the contract": The Hermosa [1982] 1 Lloyds R 570, 580. Whether conduct has this effect "is to be considered as at the time when it is treated as terminating the contract, in the light of the then existing circumstances. These circumstances will include the history of the transaction or relationship. Later events are irrelevant, save to the extent that they may point to matters which the parties should have considered as hypothetical possibilities at the relevant time": The Hermosa, supra, at page 573."

Although neither party cited this case, the above passage merely stated established principles. Quite obviously, repudiation turns on whether the conduct amounts to evincing an intention not to be bound by the contract and not on whether a proposed term was simply reasonable or not.

98. It is also clear from the learned judge's judgment in Chu Wing Ning's case (supra) that each of P and D (not just P) is entitled to have inserted in FTA all the terms which PTA expressly or by necessary implication contains. This is supported by Keung Shiu Tang v D H Shuttlecocks Ltd [1994] 1 HKC 286 where Godfrey JA in giving the unanimous judgment of the Court of Appeal said at p.291 that :

" If, during the course of negotiations in these cases over the content of the formal sale and purchase agreement, one party or the other makes demands which are so unreasonable that he must be taken to be demonstrating an intention no longer to be bound by the contract into which he has already entered, then he may well be held to have repudiated it.

But a repudiation is not to be lightly inferred. There is now a trilogy of cases in which the court has made it clear that the mere fact that you insist on what you think are your rights, even if you later turn out to have been wrong about that, is not to be treated as evincing an intention on your part to repudiate the contract."

99. Keung Shiu Tang's case (supra) and the trilogy of cases referred to in the judgment of Godfrey JA therein were subsequently endorsed and applied in Wong Kwai On & ors v Leung Wing Cheong [1999] 2 HKLRD 779 and Ma Yuk Lin & anor v Wong Kiu Ngor CACV223/1998 (unreported, 25th March 1999). Neither case was cited by the parties, but they do not establish any new law. Indeed, Wong Kwai On's case (supra) also applied the principles in Chu Wing Ning's case (supra).

100. These cases all support the common sense proposition that by a reference to FTA in PTA, the parties envisaged they would whether by themselves or by their respective solicitors draw up a more detailed document than PTA incorporating the terms they had agreed but also other terms dealing with the tenancy of Premises, matters which are not provided in PTA and which could only be resolved by negotiation between P and D. In expressing the terms of PTA and negotiating the additional terms, it is open to P and also to D to put forward their views on such terms and on how such terms should be expressed. Neither a party has a right to dictate the terms of FTA. Provided both parties expressed their views as aforesaid as part of the negotiation process and not demand or maintain a proposed term or amendment which is so patently unreasonable as to amount to evincing an intention not to be bound, either party's request or refusal for amendment is not an act of repudiation (see also Wong Kwai On's case (supra at pp.795-796)). The limitation is this : unless and until both parties agreed, neither side can unilaterally impose terms or conditions more onerous than (or inconsistent with) the terms set out in PTA (see D H Shuttlecocks Ltd's case (supra) and ITEC Food Ltd v Gleeville Co Ltd [2001] 1 HKLRD 850, a case not cited by the parties but which dealt with a provisional tenancy agreement). Therefore there will be situations where parties genuinely seek to negotiate and agree terms of FTA and neither side is to be blamed for not being able to reach agreement. In such circumstances, the law comes to assistance by allowing either or both parties to enforce PTA as an open contract.

101. The inherent difficulties in Mr Chang's arguments are also illustrated by the uncertain stance P adopted as to whether the court should adopt an objective or subjective or hybrid approach to this matter. Quite clearly, in determining whether there is repudiation of contract, the court is concerned to see whether it may be inferred from a party's conduct as to lead a reasonable person to conclude that he does not intend to fulfill his part of the contract (see paragraph 97 above). But unless there is any intention to over-reach (eg by misrepresentation, duress or undue influence etc), there is essentially nothing objective in contractual negotiations. Parties are free to put forward the terms which they wish to be incorporated and bring their respective negotiation strengths and weaknesses into the equation. The cardinal principle of contract law that the court should not write the agreement for the parties stems from the impossible task of assessing the subjective considerations and rationale by the parties during the negotiation process.

102. In recognising the need to look into the parties' uncommunicated explanation/rationale for putting forward their proposed terms (as suggested by Mr Chang), which cannot be described as an objective exercise, P must have acknowledged that in the present context an objective assessment is inherently unworkable. Indeed, Mr Chang asked the court to consider matters private to P, such as P's sincerity by not looking elsewhere for other properties and by actively seeking advice from his solicitors, P's lack of financial constraints and P's alleged willingness to abandon Amendments other than the inclusion of the concept of "reasonableness" (which I do not accept), and matters private to D, such as D's practice of not allowing amendments to Draft in other cases. I do not agree with the approach suggested.

103. I now consider Mr Chang's arguments in the light of the law stated above. In his written final submissions, Mr Chang discussed each of Amendments. Save for P's Amendments to Clause 9, I accept that P genuinely put forward Amendments as part of the negotiation process. I also find that D has satisfied Implied Term in approaching the negotiation process genuinely by tendering Draft for P's consideration and reverting with comments on Amendments. I further find that the fact D refused to entertain most Amendments did not mean it did not approach the negotiations genuinely, as will be apparent from the analysis below. The issue is not whether Amendments are reasonable but whether D's rejection of Amendments (other than those in respect of Clauses 4 and 6(b) of Draft) is unreasonable to the extent of evincing an intention not to be bound by PTA. I propose to deal with Amendments as follows :

(1)	As regards Amendments for inclusion of the phrase "all outgoings capital in nature" in Clause 5(b), Zee said it was a duplication of Amendments in Clause 6(b) already allowed by him. I cannot see how D evinces an intention not to be bound in light of its agreement to Amendments in Clause 6(b). Even recognising that P was not aware of such agreement, I still do not see how, when D as landlord agrees to bear all specified and known capital outgoings as provided in Clause 5(b), a refusal to bear unidentified outgoings (the existence of which is unclear) evidences repudiatory conduct.
(2)	As regards Amendments for deletion of "maintenance fees and all other taxes, assessments" from Clause 5(b), it is plain that the maintenance fees in Clause 5(b) "in respect of [Premises]" are not the same as maintenance fees in respect of equipment as provided in Clause 5(i). There is no basis to ask D for an election between Clauses 5(b) and 5(i) on the ground of duplication. Further, given P's contention that a catch-all provision is permissible for Clause 5(b) (see sub-paragraph (1) above), by parity of reasoning, it is difficult to understand P's claim that a catch-all inclusion of "all other taxes, assessments" is unnecessary or unreasonable. In any event, since (on P's case) capital outgoings are excluded, the reference to taxes and assessments, if any, in Clause 5(b) can only be non-capital in nature. I do not find it repudiatory for D as landlord to suggest such inclusion. Ultimately it is a question of agreement between the parties and if no agreement can be reached, PTA can be enforced as an open contract on usual covenants.
(3)	Mr Chang submitted that the word "reasonable" or "reasonably" was used in Draft in Clauses 4, 5(b), 5(j) and 5(r), so such concept was not foreign to D. He said it was not open to D to blow hot and cold by including such concept as aforesaid but not for Amendments just on the ground that D wished to have final say on certain matters due to fear of future disputes arising from different interpretations of what is reasonable.
	Mr Chang argued that in respect of Amendments requiring costs to be "reasonable" in Clauses 5(g), 5(j) and 7(b), the common law will readily impose a term that the landlord could only recover reasonable service charges against the tenant (Finchbourne Ltd v Rodrigues [1976] 3 All ER 581, 596-587 and Halsbury's Laws of England 4th ed Vol.27(1) para.300 at p.281). He submitted that such Amendments were to protect the tenant from being put at the mercy of the landlord. However, I note that such legal proposition is based on a bargain already made between the parties and, as explained above, the court can in such context determine whether the implication of "reasonable" costs is necessary to give business efficacy to the contract. It is a different matter to determine what in the first place should be the bargain between the parties. In any event, it is clear from Woodfall's Law of Landlord &Tenant Vol.1 para.7.182 at pp.7/63-64 cited by Mr Chang that whether such "reasonable" costs can be implied depended on the bargain as agreed between the parties :

"Some leases contain express provisions to the effect that the landlord's expenditure must be reasonable in amount and reasonably incurred. In the absence of such provision, however, whether any term as to reasonableness will be implied will depend on the particular facts. In one case [ie Finchbourne Ltd's case (supra) referred to above] a term was implied into a service charge provision to the effect that the costs claimed must be fair and reasonable. However, in two cases concerning the recovery of costs of insurance the court has declined to imply any term as to reasonableness."

In the circumstances, I do not see D's stance on Amendments for this clause as showing any repudiatory intention not to be bound by PTA.

Amendments to Clause 5(j) refer to giving "reasonable written notice" which Mr Chang argued precluded a short period of notice or notice at odd hours being given in order to safeguard the tenant's interest. It was also submitted that the requirement for written notice gave certainty but would not prevent notice by other means if the parties agreed. Here, D agreed to give notice to tenant but not reasonable notice. Mr Chang referred to section 24(1)(b) of the Landlord and Tenant (Consolidation) Ordinance Cap.7 ("Ordinance") which provided that the tenant was entitled to written notice for the landlord to enter the leased premises and effect all necessary repairs. I note that Clause 5(j) itself provides for entry by the landlord at all reasonable times (a) to view the state of repairs/take inventories and (b) to carry out repairs. I further note with interest that in section 24(1)(a) of Ordinance the landlord may at all reasonable times enter and inspect the leased premises with a view to ascertaining whether any necessary repairs are required (ie akin to (a) above) and there is no statutory requirement at all to give reasonable written notice. In my view, neither such Amendments nor D's response is repudiatory. I cannot even say that either position is unreasonable in the context of the negotiations between the parties. It is open to the parties to and I find that they did put forward the above views genuinely in the course of negotiations.

Amendments to Clauses 5(m) and 5(p) require that the landlord's consent to structural and other alterations by the tenant or to exhibition of lighting/signage, not to be unreasonably withheld or delayed. Mr Chang submitted that such provision is common and, without such Amendments, an obstructive landlord could nullify the tenant's "vested right" to make alterations. In my view, as these acts affect Premises and hence the reversion, it is open to D to put forward its views (as it did) in the course of negotiations. Indeed, the passage in Woodfall's Law of Landlord &Tenant (supra at para.11.260 at p.11/132/9) cited by Mr Chang only said that a lease "sometimes" provides (not must provide) that the lessor's consent to alteration is not to be unreasonably withheld. Indeed, para.11.256 at p.11/132/8/1 of Woodfall's Law of Landlord & Tenant said that :

"A covenant against alterations may be absolute (i.e. alterations are prohibited under all circumstances) or it may be qualified (i.e. alterations are prohibited unless the landlord consents to them). It is common to find covenants which are hybrid; the covenant being absolute in respect of some alterations (e.g. structural alterations) and qualified in respect of others (e.g. non-structural alterations)."

Given the aforesaid usage of different types of covenants which depended on the agreement between the parties, I cannot see D's stance as repudiatory. I also draw no assistance from section 39(1)(b) of Ordinance which dealt with sub-letting issues.

Mr Chang submitted that P testified that the term "reasonable" was considered to be "commonly used and widely accepted" within the trade. However, other than his experience with the tenancy of SB Apartment between Kerry Properties Ltd and CAG, P did not give any particulars of such hearsay knowledge. On the other hand, Zee who had 10 years of experience on tenancy matters with D gave evidence that in his experience, whether D acted as landlord or tenant, the draft formal agreement prepared by the landlord is seldom amended. I have no reason to doubt Zee's experience.

Mr Chang argued that D's objection (which was primarily focused upon what it perceived as the difficulty in setting an agreed standard for "reasonableness") was unsustainable as the court decides what was and was not reasonable on a daily basis. As illustration, Mr Chang referred to Woodfall's Law on Landlord & Tenant (supra at para.11.140 et al at p.11/79) which set out the general guidance and test adopted by the courts in respect of covenants in tenancies against assignment without the consent of the landlord, such consent not to be unreasonably withheld. I note that the learned text dealt with the interpretation of the terms as agreed between the parties and not with the negotiation of terms between the parties. I draw no assistance from this passage. Indeed, in Woodfall's Law on Landlord & Tenant (supra at para.11.118 at p.11/61), it is said as follows :

"A covenant against alienation may be absolute, that is to say it may contain an absolute prohibition against alienation, or it may be qualified, that is to say that it may prohibit alienation unless certain conditions are fulfilled e.g. the obtaining of the landlord's consent. Other conditions may also be attached to a covenant against alienation e.g. a condition prohibiting alienation of part only of the property, or prohibiting alienation during the last seven years of the term. ......"

Quite clearly, the nature of the covenant depends on the parties' negotiations. Further, the passage from Woodfall's Law on Landlord & Tenant cited by Mr Chang speaks of the English position which does not necessarily apply to Hong Kong. In Merry, Hong Kong Tenancy Law 4th ed (2003) at pp.130-131, the learned author said that a typical restriction on transfer in a tenancy agreement may be an absolute prohibition or a qualified/conditional covenant. He went on to say as follows :

" A variant of the qualified prohibition, rarely seen in Hong Kong, is one which requires the landlord's consent "which consent shall not be unreasonably withheld". ...... In England, it is a statutory requirement that consent must not be unreasonably withheld, so that the tenant may challenge the landlord's refusal even when reasonableness is not mentioned (though not where the covenant is absolute). A formidable body of case law has been built up illustrating when a refusal is or is not reasonable.

There is no equivalent provision in Hong Kong (though perhaps there should be). Unless the covenant stipulates that consent is required and that consent shall not be unreasonably withheld, the reasonableness of the landlord's refusal of consent is irrelevant."

Mr Chang summarised P's Amendments as reasonable, made for the purpose of clarification or for the avoidance of doubt on interpretation and do not conflict with the terms of PTA. I have no doubt that Amendments for inclusion of the concept of "reasonableness" do not conflict with the terms of PTA. But it does not mean that D's stance is unreasonable or, more importantly, repudiatory. Looking at the matter objectively and broadly, I cannot say D's stance on these clauses go to the fundamental basis of the contract so that D evinces an intention not to be bound by PTA.

(4)	In respect of Amendments for Clause 7(c), P admitted in evidence and even Mr Chang acknowledged that such Amendments might arguably be superfluous or inoperative in the absence of optional rights in favour of the tenant in Draft. Although I agree that such Amendments are not unreasonable and are certainly not inconsistent with other provisions of Draft, I cannot see how a refusal to include something superfluous to FTA can be regarded as repudiatory.
(5)	It is plain and obvious that Amendments for Clause 9 are more onerous than and contradict the express agreed provision in Rider 10. Mr Chang argued that P is an expatriate seconded to Hong Kong with a possibility of returning to work overseas in future and that he has been advised that such Amendments were common for expatriates working in Hong Kong and were in fact used in the tenancy for SB Apartment. Mr Chang submitted that the recent amendment to Ordinance shortening the minimum statutory period of notice from 6 to 3 months under section 119 speak of the legislative intent and benefit to both parties to have a quick break from an existing tenancy. The short and simple answer to this is that whatever considerations that may have lurked in their minds, the parties have sealed their bargain by Rider 10 which can only be varied by further agreement. Indeed, P has known and agreed to the terms of Rider 10 as early as 24th August 2002 when he agreed to 24/8/02 Offer.
	Mr Chang then suggested that any conflict between Amendments for Clause 9 and Rider 10 was minor because the provision in Rider 10 still held for all circumstances other than the proviso in Amendments, and an early break would be beneficial to D in a rising market. To take the latter point first, there was plainly no rising market. Zee gave evidence that he wanted to keep P as tenant because the rental market was inactive and Premises were in fact not let out again until September 2003. The suggestion is unrealistic in the context of the rental climate at the time of which the parties or at least Zee must be aware. In any event, I accept Zee's evidence that even in a rising market, the possibility of improved rental may not be necessarily advantageous as other factors may militate against the possible increase in rental income. More fundamentally, Rider 10 provides that there will be no and not a small possibility of P giving notice to vacate Premises before 12 months (or making payment in lieu). I do not understand why it is suggested that the spirit of Rider 10 has not been violated but is in fact complemented.
	It was held in D H Shuttlecocks Ltd's case (supra) that where the provisional agreement was signed, neither party could unilaterally impose terms in the formal agreement more onerous than those set out in the provisional agreement. In ITEC Food Ltd's case (supra), which dealt with a provisional tenancy agreement, the learned judge said at p.854 of the judgment that "the new amended [provisions] were inconsistent with the terms of the provisional agreement and they became more onerous to the tenant". Quite clearly, Amendments for Clause 9 contradict or are inconsistent with and more onerous than Rider 10. In my view, P's proposal for and non-withdrawal of such Amendments are clearly unreasonable and, under the principles in Chu Wing Ning's case (supra), a repudiation of PTA.

104. Looking at D's stance in respect of the totality of Amendments, I cannot say that D had no genuine desire to proceed with the deal. Disagreement and counter-proposals in the course of negotiations do not necessarily breed repudiation. Mr Chang criticised D for failing to give reasons for rejection of Amendments. But if it were a criticism (which I disagree), it is a criticism that should be directed at both parties for P also did not communicate his reasons for Amendments and for continued insistence on or non-withdrawal of Amendments.

105. P's contentions have generally focused on whether Amendments were reasonable. However, the material issue is whether D's stance was unreasonable to the extent of being repudiatory. It does not follow and Mr Chang has cited no legal authority to support the suggestion that a refusal of a reasonable stance adopted by one party over the terms of a draft FTA ipso facto led to the conclusion that the other side is unreasonable. I am satisfied that D has complied with Implied Term by its conduct and had 2nd Term been applicable (which I disagree), it has complied with the same too.

Conclusion

106. In the circumstances, P's claim is dismissed. There is no reason why costs should not follow event. I therefore grant an order nisi that P should pay D's costs of the action (including all costs reserved, if any) to be taxed if not agreed with certificate for counsel.