領城物業有限公司 v. 麥國強

DCCJ2945/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2945 OF 2003

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J U D G M E N T

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1.     The plaintiff and the defendant entered into a tenancy agreement on 23 November 1999 for a term of two years at the rental of $10,500 per month.  The tenancy was evidenced in writing in Chinese.  It can be seen on page 50 of the bundle.

2.    The property in question is a residential property known as Flat H, on the 38th Floor, Block 3, La Cité Noble, 1 Ngan O Road, Tseung Kwan O, New Territories (“the Suit Premises”).

3.    The plaintiff is a limited company in which Mr and Mrs Wong are the directors and shareholders.  The plaintiff is the registered owner of the Suit Premises.

4.    It is not disputed that the defendant held over the tenancy after the expiry of the lease on 31 November 2001.  The defendant continued to pay the rental monthly to the plaintiff and sometimes in arrears until the month of May 2002.

5.    It is further undisputed that the tenancy became a periodical tenancy from month to month after December 2001 when the two-year tenancy expired. 

6.    It is also not disputed that the rental was constantly in arrears after April 2001, and that it is also not disputed that the final payment of outstanding rental was on 16 October 2002 for a sum of $21,000, representing two months’ rental paid in arrears.

7.    It is common ground that the defendant finally quit the Suit Premises on 3 January 2003, by which time a total of six months’ rental was outstanding and was immediately payable.

8.    The plaintiff apparently repeatedly demanded payment of outstanding rental from the defendant.  The defendant admitted that he had negotiated with the plaintiff for payment of outstanding rental in arrears by instalments until sometime in November the plaintiff considered that there was enough patience from the plaintiff and some action was required.

9.    It is the defendant’s claim that he received a visit from Mrs Wong, a director and shareholder of the plaintiff company, she had come with a female friend and visited the premises sometime in November 2002.  Both him and his wife were absent from the Suit Premises, they were received by the Filipino maid and his six-year-old son. 

10.    The defendant claimed that the plaintiff and her friend had come to the premises, talked loudly to each other, it had an effect of scaring his six-year-old son and his Filipino maid, although he admitted that Mrs Wong and her friend did not talk directly to the defendant’s son and did not scream at his Filipino maid.

11.    Soon after that visit, the defendant claimed the plaintiff had caused two documents to be inserted in his mailbox, and these two documents appear on page 119 and 120 of the bundle.  These are two documents which, written in Chinese, says, “Please pay outstanding rent immediately or you shall bear all the consequences.”  In the background one can see the picture of a pair of handcuffs.

12.    The defendant admitted that he was not scared by these two documents, he admitted it might scare his son.  In any event, it is not disputed that the plaintiff instituted distress proceedings at the Suit Premises sometime in November or December 2002, leading to the bailiff visiting the premises on 31 December 2002, leaving a notice that the bailiff will visit on a consecutive date.

13.    The defendant admitted that he had been looking at premises and intended to move out of the premises because he knew that the plaintiff had been after him for rental in arrears and had later on decided to commence distress proceedings on the Suit Premises.

14.    The action by the bailiff on 31 December 2002 was to leave clear notice to the defendant of the intention of distress proceedings and that the bailiff had given time for the defendant to pay outstanding rental before his second visit to the premises.  Therefore, distress proceeding had commenced.  The levy of execution of distress had yet to take place. 

15.    On 3 January 2003, the plaintiff’s director and shareholder, Mrs Wong, arrived with two of her female colleagues to the Suit Premises and she had been notified by the management office that the defendant was moving out of the Suit Premises that very same day.

16.    To cut a long story short, the meeting at the Suit Premises was unpleasant and it ended up in the police being called.  Subsequently, Mrs Wong and her colleague, Miss Wong, left the Suit Premises, leaving a Miss Lee Sze-miu at the Suit Premises.

17.    According to the defendant, it was his condition at the time that he would only agree to talk to one of the three persons - that is Mrs Wong and her two colleagues - and he had indicated since Mrs Wong was excited and shouting, and demanding for rental, he had refused to talk with her.  He preferred to talk to Miss Lee whom he thought was the sister of Miss Wong.

18.    The defendant admitted he was moving out from the premises.  He admitted he had been looking for alternative accommodations and he knew he had outstanding rental not settled.  He said in court, he intended to give notice to quit only after he vacated the Suit Premises and not before.

19.    Moreover, as Miss Lee had remained behind at the Suit Premises on 3 January, he negotiated a surrender agreement with her.  He drafted it and Miss Lee signed it and he was the one who wrote that she represented the landlord.

20.    The defendant relies on this document of surrender as his defence that the rent had been waived by the plaintiff.

The Issue

21.    The issue before me is therefore ‘Is this surrender agreement binding on the parties?’  Miss Chan, counsel for the defendant, conceded that the defendant’s defence is not relying on apparent authority of Miss Lee when she signed the surrender agreement.  Rather, the defendant’s defence is relying on the ratification by the plaintiff by her conduct and acquiescence after the surrender agreement was signed by Miss Lee.

22.    The conduct of ratification, according to Miss Chan, is the fact that the plaintiff failed to inform the defendant that the surrender agreement was not in order or not effected because it was executed without the authority of the plaintiff.  Miss Chan further referred to the total inaction by the plaintiff until the issue of the writ on 22 May 2003.

23.    According to the defendant, he believed that a phone call he received from a debt collector agency on behalf of his landlord, who demanded that he should pay the outstanding rental, was made on behalf of the plaintiff.  The caller did not give the name of the landlord but the caller told him that he should know who he was calling on behalf of.

24.    Mr Mak admitted that he believed the phone call was instigated by the plaintiff for he owed, at the time, no other rental to any other landlords.  He had therefore informed the caller that he should ask the landlord to refer to the surrender agreement.  This phone call was apparently received two or three months after the 3 January incident.

25.    Mr Wong, counsel for the plaintiff, submitted that ratification must be pleaded.  He relied on a judgment of Godfrey VP in the case of Wellcherry Limited v Wellcherry Limited CACV 36 of 2000.  (Date of judgment of the Court of Appeal on 23 May 2000).

26.    In paragraph 5 of Godfrey VP’s judgment, on page 4 of the Judiciary Legal Reference website version of the judgment, line 3 onwards:

“He also urged on us a point which he described as a ratification point, but there is no substance in this point.  The case for the defendant is that Mr Shum made clear to the plaintiff’s representatives that he had no authority to sign.  If a subsequent ratification negating the effect of this is to be established, it must be pleaded and proved by the plaintiff.”

27.     Mr Wong relies on this case as good authority in support of the submission that ratification must be pleaded.  In the present case the defendant did not plead in the defence that this surrender agreement, although executed without the authority of the plaintiff at the time, was ratified by the subsequent conduct of the plaintiff.

28.    I accept that the Wellcherry Limited case is good authority to support the point that ratification must be pleaded in the pleadings.  Consequently, the defence cannot now raise in argument the point of ratification of the surrender agreement.

29.    Even if it was pleaded, the facts must show unequivocally that the plaintiff had by conduct, accepted that Miss Lee’s entering into the surrender agreeing was authorised by the plaintiff. 

30.    The apparent silence from January to April 2003 or May 2003 is not sufficiently long a period for the defendant to consider the plaintiff was no longer pursuing a claim against him for rentals in arrear.  After all, he confessed that he did receive a phone call demanding rental from him from someone he believed was sent by the plaintiff in April 2003.  Silence from the plaintiff for a period of three months is hardly basis for conduct or acquiescence of ratification.

Agency

31.    As to the agency of Miss Lee, the evidence shows that Mrs Wong did not give any authority to Miss Lee on 3 January 2003 to sign a surrender agreement.  Miss Lee may have the authority to check the premises and then see that no damage is done when the defendant quit the premises on that day, and she may have the authority to take and repossess the premises and the defendant may surrender the keys to her.

32.    There is no evidence as to the extent of the agency of Miss Lee.  In fact, Mrs Wong’s evidence was she did not know why Miss Lee remained in the premises.  She herself had gone to pursue and follow the removal van.

33.    After the scene Mrs Wong and her two friends made at the Suit Premises on 3 January 2003, it is hardly possible for the defendant to imagine or expect the plaintiff to forget about the outstanding rental of six months. 

Consideration

34.    As to the issue of consideration, Miss Chan submitted that the plaintiff is estopped from claiming for rental outstanding from the plaintiff for the plaintiff had waived it under the surrender agreement.  She refers to Chitty on Contracts, paragraph 22-044 at p.1303:

“Consideration for Waiver.

A waiver is also distinguishable from a variation of a contract in that there is consideration for the forbearance moving from the party to whom it is given.  It may therefore be more satisfactory to regard this form of waiver, that is ‘waiver by estoppel’, as analogous to, or even identical with, equitable forbearance of ‘promissory’ estoppel.  Although consideration need not be proved, certain other requirements must be satisfied for such an estoppel to be effective:  first, it must be clear and unequivocal, secondly, the other party must have altered his position in reliance on it, or at least acted on it.”

Quite clearly the one who forebears must be the plaintiff under the surrender agreement.  If the plaintiff waived the rental, and someone had therefore altered his position in reliance of it, who was then this other party, what position did he alter?  He did not have to pay rent?  Is there sufficient consideration?

35.    Paragraph 22-046 of Chitty on Contracts has more to say:

“It is, however, important to distinguish between a case in which a party waives his right to treat the contract as repudiated but does not abandon his right to claim damages for the loss suffered as a result of the breach, and the case where the innocent party waives not only his right to terminate performance of the contract but also his claim for damages for the breach.  The former is an example of waiver by election, whereas the letter is more properly classified as a species of waiver by estoppel.”

36.    Let us consider who would stand to gain and who would lose out by the waiver.  The plaintiff would lose out by not getting the rental at all, something that she had gone to great lengths to recover by visiting the premises in November 2002 and on 3 January 2003.

Why Should She Waive the Rental?

37.    The defendant claims the tenant would not vacate the premises if the surrender agreement was not signed.  On the contrary, the evidence was the defendant did vacate the premises on 3 January 2003.  If he simply quit the premises by vacating it, and the plaintiff did not receive any prior notice, as the notice was only given at the Suit Premises on 3 January 2003, and since this is a month-to-month tenancy and termination of the tenancy could be effected by one month’s notice, the defendant’s conduct on 3 January 2003 clearly demonstrated he no longer wished to reside at those premises.

38.    For the reasons above I cannot agree that the surrender agreement was supported by any consideration from the defendant, particularly in the case of a tenant who has failed to pay any rental for the past six months and has no intention to pay the rental to the landlord when he was quitting the premises, removing all his belongings when distress proceedings had already been commencd, waiting for execution to take place.

39.    For these reasons, I reject the defendant’s defence.  I am satisfied that the surrender agreement was signed without the authority of the plaintiff. 

40.    The defendant well knew the landlord had been after him for outstanding rental for a number of months and the bailiff was due to levy execution at any time.  The landlord, Mrs Wong, came up to the premises personally to stop him removing his belongings on 3 January 2003.  The defendant could not have anticipated that the plaintiff would waive any rental outstanding from the conduct and the demands of Mrs Wong on 3 January 2003.

41.    He took the opportunity, upon Mrs Wong’s departure from the premises and drafted the surrender agreement himself where he put down everything in his favour and asked Miss Lee, who had remained behind, to sign, well knowing that the landlord’s representative was Mrs Wong.  He admitted he dealt with Mr and Mrs Wong all along.  Therefore, I give judgment in the sum of $43,871 to the plaintiff.

Interest

42.    Interest is at half judgment rate from date of writ to the date of judgment and thereafter at judgment rate until full payment. 

Costs

43. Costs usually follow the event, and this court has a discretion as to costs.

44. The circumstances that this court shall exercise its discretion and deal with the costs issue are set out in Order 62, Rule 4 to Rule 5 of the District Court Rules.  I do not think that this is an appropriate case to order costs on Small Claims scale for a plaintiff is not bound to set off the deposit for rental from the outstanding rental in arrears.

45. Clause 2 of the tenancy agreement stated clearly that the contractual duty of the defendant is that no deduction from the deposit could be made until after all outstanding rentals are paid.

46. Although the plaintiff in the statement of claim admitted that it would set off the deposit against outstanding rental, at the time Mrs Wong admitted she was not aware that there was a payment of rental on 16 October 2002.

47. I consider the plaintiff was entitled to bring the claim to District Court because under the tenancy agreement the plaintiff did not have to take into consideration the setting off of the deposit.

48. I have taken into consideration that the plaintiff was acting in person at the time when the writ was issued and that the defendant did not bring to the plaintiff’s notice the payment of rental on 16 October 2002 until a later stage and the defendant was represented by solicitors on 18 June 2003 when the plaintiff was not represented by solicitors until some time in October 2003.  Had the defendant considered that it should save costs, the defendant could have made other arrangements, like making payment into court to stop costs escalating.

49. I award costs on District Court scale with Certificate for Counsel.