WORLDWIDE INTERNATIONAL CORPORATION LTD v. GLORYLUCK INDUSTRIAL LTD

DCCJ 4659/2018

[2024] HKDC 1886

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4659 OF 2018

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BETWEEN

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JUDGMENT

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Background

1.  This case is concerned with the refund of the security deposit under a tenancy agreement, and the condition of the premises upon delivery of possession by the tenant to the landlord on expiry of the tenancy. The Plaintiff was the tenant and occupant of the Property situate at No. 1, 14^th Floor, Landwide Commercial Building, Nos 118-120 Austin Road, Kowloon, Hong Kong (the “Property”), and the Defendant was the landlord. It is common ground that the parties had signed three tenancy agreements for the Plaintiff to occupy the Property, for the following terms:

(a) 1^st Tenancy Agreement dated 12 July 2012, for a term of 2 years from 18 July 2012 to 17 July 2014;

(b) 2^nd Tenancy Agreement dated 25 July 2014, for a term of 2 years from 18 July 2014 to 17 July 2016; and

(c) 3^rd Tenancy Agreement dated 17 November 2016, for a term of 2 years from 18 July 2016 to 17 July 2018.

2.  The 3^rd Tenancy Agreement was for the aforesaid term of 2 years at a monthly rent of HK$21,000. Upon execution of the same, a security deposit in the sum of HK$63,000 was paid by the Plaintiff to the Defendant. Under Clause 9 of the 3^rd Tenancy Agreement, the deposit shall be refunded to the Plaintiff within 14 days after the expiration of the tenancy and delivery of vacant possession to the Defendant. Upon expiry of the 3^rd Tenancy Agreement, the Plaintiff delivered possession of the Property to the Defendant. However, the Defendant had refused to return the deposit to the Plaintiff, claiming that the Plaintiff had failed to return the Property to it in good, tenantable or substantial repair and condition as required under the 3^rd Tenancy Agreement, as a result of which the Defendant has suffered damage and counterclaims for the same. The Defendant also seeks to set off the Plaintiff’s claim against its counterclaim.

The Plaintiff’s case

3.  The Plaintiff’s case is that in or around July 2012, Mr Chan Koon Chau (陳冠洲) (“Mr Chan”), a director of the Plaintiff negotiated with a Mr Ip Siu Kau (葉兆球) (“Mr Ip Senior”) of the Defendant to enter into the 1^st Tenancy Agreement.

4.  At the time, Mr Chan and his colleague Mr Wong Sau Yan (黃守仁) (“Mr Wong”) inspected the Property. Mr Ip Senior was informed by them that the windows would be boarded up in order to use the Property as a show room. At that time, however, Mr Chan did not pay attention to the condition of the windows of the Property.

5.  After execution of the 1^st Tenancy Agreement, the windows of the Property were all boarded up, and this remained so throughout the terms of the 1^st Tenancy Agreement through the 3^rd Tenancy Agreement.

6.  In July 2018, the Plaintiff decided not to enter into further tenancy agreements. Upon the expiry of the term of the 3^rd Tenancy Agreement, the Plaintiff arranged to deliver vacant possession to the Defendant on 17 July 2018. Mr Sae Wong Suwat (葉家榮) (“Mr Sae”) of the Defendant inspected the Property in the presence of Mr Wong of the Plaintiff. At that time, Mr Sae only requested the removal of the boards at the windows of the Property. The Defendant later removed the boards of the windows and delivered vacant possession to the Plaintiff.

7.  Various requests were subsequently made by the Plaintiff to the Defendant to demand for the return of the rental deposit but were refused by the Defendant on the ground that the Plaintiff has a responsibility to first repair the damaged parts, in particular the damaged windows, of the Property.

8.  It is the Plaintiff case that when the Plaintiff took possession of the Property, the building was already over 40 years old. There would be some existing defects and wear and tear at the Property. The Plaintiff accepts that it took possession of the Property on an as-is basis, but denies the damage of the windows as alleged by the Defendant. The Plaintiff says it had completely boarded up the windows of the Property throughout the terms of the 3 tenancies, so the Plaintiff could not have caused the damage to the windows as alleged. In any event, the Plaintiff says it had delivered the Property in tenantable condition to the Defendant.

9.  The Plaintiff also challenges the quantum of damages counterclaimed by the Defendant, in the event the Court finds in favour of the Defendant. The Plaintiff contends that the costs of the repairs carried out by the Defendant were excessive.

The Defendant’s case

10.  The Defendant’s case is that upon inspection of the Property at the expiry of the 3^rd Tenancy Agreement, the Defendant observed that wooden panels were affixed to and covered the windows of the Property. The Defendant then requested for their removal on or about 17 July 2018, which the Plaintiff did.

11.  After the removal of the wooden panels, upon further inspection, the Defendant found the following damage to the Property, namely:

(1) two windows were broken and nearly fell off;

(2) four other windows could not be opened;

(3) five pieces of marble window sills were broken;

(4) seven window handles were broken;

(5) one electricity switch was broken; and

(6) one ventilation fan was broken.

12.  The Defendant thus counterclaims against the Plaintiff for repairing and making good the above damage and for mesne profits or loss of rental for the period of the repair works as follows:

(1) cost and expenses of repair works in the sum of HK$68,500; and

(2) mesne profits or loss of rental income for the period during the renovation works to fix the damage, in the sum of HK$38,612.94.

13.  The Defendant thus counterclaims for a total sum of HK$107,112.94, and seeks to set off the same against the rental deposit claimed by the Plaintiff. In other words, the Defendant seeks a further payment of HK$44,112.94 from the Plaintiff.

14.  In pursuing its counterclaim, the Defendant relies on the following specific clauses in the 3^rd Tenancy Agreement that requires the Plaintiff to keep in particular the windows of the Property in good condition, under “Section III: Tenants Obligations”:

(1) Clause 3.01: “To obey comply with and to be answerable and responsible for and to indemnify the Landlord against the breach of all ordinances, regulations, bye-laws, rules and requirements of any Governmental or other competent authority relating to the use and occupation of the Premises by the Tenant or any other act, deed, matter or thing done, permitted, suffered or omitted therein or thereon by the Tenant…”[1];

(2) Clause 3.02(a): “To keep and maintain at the expense of the Tenant all the interior parts of the Premises including…and the Landlord’s fixtures and fittings therein including (without limitation) all doors, windows, electrical installations and wiring…in good clean tenantable substantial and proper repair and condition and as may be appropriate from time to time properly painted and decorated”;

(3) Clause 3.02(b): “At the expense of the Tenant to replace from time to time all Landlord’s fixtures and fittings and appurtenances in the Premises which may be or become beyond repair at any time”;

(4) Clause 3.04: “To be responsible for the cost of replacing all broken or damaged windows, shopfront glass, doors and fixtures of and in the Premises whether the same be broken or damaged by the negligence of the Tenant or owing to circumstances beyond the control of the Tenant”. [underlines added]

15.  The Defendant also relies on the following provision under “Section V: Restrictions and Prohibitions”:

Clause 5.04: “Not to block up, darken or obstruct or obscure any shop front, window or any other window or lights belonging to the Premises without having obtained the express written consent of the Landlord which consent may be given subject to such conditions as the Landlord may in its absolute discretion consider fit to impose”. [underline added]

16.  The Defendant says that the clear and unequivocal terms of Clause 5.04 of the 3^rd Tenancy Agreement provide that the Plaintiff was not permitted to board up the windows of the Property in the first place.

17.  In fact, all three tenancy agreements contain the same terms mentioned above.

18.  The Defendant also contends that in so far as existing defects and wear and tear of the Property are concerned, Clause 3.04 of the 3^rd Tenancy Agreement also requires the tenant to replace any broken windows even if they were broken owing to circumstances outside of its control.

19.  It is therefore submitted by the Defendant that this case is not to be resolved only by reference to what constitutes “tenantable repair” in the circumstances of this case, but also the specific obligations of the Plaintiff in light of the above clauses of the 3^rd Tenancy Agreement, especially those requiring the Plaintiff to maintain the windows of the Property.

20.  The Defendant engaged its own contractor to repair the alleged damage, and the repair works lasted for about one month. As mentioned above, the Defendant now counterclaims for such costs for the repair work and mesne profits or loss of rental income, and seeks to deduct the same from the rental deposit.

The issues

21.  The issues in dispute can be summarised as follows:

(1) The condition of the Property at the end of the 3^rd Tenancy Agreement;

(2) Given the condition, whether the Plaintiff was in breach of the 3^rd Tenancy Agreement;

(3) Whether the Defendant is entitled to damages, and to set off the rental deposit; and

(4) Quantum of such damages.

Legal principles

The meaning of “good and tenantable repair”

22.  First of all, generally, concerning a tenant’s obligation to keep the property in good and tenantable repair, the Plaintiff referred to So Hon Ming Francis v Cheung Lau Shau Chun and Another, DCCJ 367 of 2019, 29 November 2021; [2021] HKDC 1494 where HH Judge KC Chan stated:

“28. Regarding the obligation to keep and deliver premises in good and tenantable repairs, the following summary of the law given in Hong Kong Tenancy Law by Malcolm Merry, 4^th ed, at p 116 was approved and applied by HHJ Lok (as he then was) in Lee Ho Seok v Kanvest Limited[2]:

"The standard will vary with the length of the lease, the obligations to repair undertaken by tenant and landlord in other covenants, and the age, character and location of the premises at the time the lease was entered into. In one old case it was said that

'good tenantable repair' is such repair as, having regard to the age, character and locality of the house, would make it reasonably fit for the occupation of a reasonably-minded tenant of the class who would be likely to take it.

This means that a higher standard of repair would be expected, for instance, in a modern flat in a middle-class district than in a flat in an old tenement block in a crowded area. The character of the district and the character of the premises may change over time, so it is important to consider the nature of the location and the premises at the beginning of the lease. Where, as is common in Hong Kong, the lease is for three or fewer years these considerations are, however, unlikely to make a difference."

23.  The Defendant agrees that paragraph relied upon by the Plaintiff states the general principle that the level of “good and tenantable repairs” may vary with the length of the lease, the obligations to repair undertaken by the tenant and landlord in other covenants, the age, character, and location of the property.

24.  The Defendant however says that the consideration of what constitutes tenantable repair is not a central issue in the present case, as the Defendant does not rely solely on the meaning of the “tenantable repair” clause in the 3^rd Tenancy Agreement, but rather, on various other more specific obligations stated in the 3^rd Tenancy Agreement to maintain the windows in the Property as mentioned above.

The landlord’s duties

25.  A tenant takes the property subject to any defects existing at the time of the letting. A landlord is not under an implied obligation to repair and maintain the leased property, or to put a demised property into repair at the commencement of the tenancy – see Golden Sunrise Ltd v Lee Kwok Hung & Anor [2005] 1 HKC 466 at paragraphs 33-34 & 37; Megarry & Wade, The Law of Real Property, (10^th Ed) at paragraphs 18-030.

26.  Further, a landlord is not under a duty to warn the tenant of any defects in the property. A tenant has to rely on his own inspection – see Fortune Global Development Ltd v Shung Cheong Food Trading Ltd [2002] 2 HKLRD 447 at paragraphs 65 and 84.

Damages and quantum

27.  As for damages, an aggrieved landlord is entitled to damages for wrongful repudiation of a tenancy agreement, subject to a duty to mitigate his loss. It falls upon the errant party to establish that mitigation has not taken place – see Windsor House Limited (formerly known as Chinese Estates (Windsor House) Ltd) v Legend Glory Corporation Limited & Another, HCA 940 of 2017, 12 February 2019; [2019] HKCFI 194 at paragraph 12.

28.  Further, the landlord’s duty to mitigate is not an onerous one. The landlord is not required to do anything other than in the ordinary course of business – see Wing Siu Company Limited v Goldquest International Limited, HCA 4145 of 2001, 18 August 2006, Master de Souza at paragraph 8.

29.  If a defendant wishes to set up a positive case that the plaintiff has failed to mitigate his loss, he must plead the allegation with specific particulars – see Foxhill Investments Limited v Sino Golden International Group Holdings Limited [2021] HKCFI 3662.

Ignorance of the contents of a signed contract

30.  When a person signs a legal document, he is bound by the act of signature. It is no defence to say that he did not understand the contents of a legal document – see Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at paragraph 51; Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006) 9 HKCFAR 334 at paragraph 83.

31.  However, the Plaintiff contends that, notwithstanding a party’s signature on a contract, one may be able to escape being bound by a contractual term if several conditions are satisfied, including (a) he was not actually aware of the term when he signed the contract, (b) it was reasonable in all the circumstances for him not to have read the contract before signing, eg because the other party encouraged him not to read it or because the other party did not provide him with a reasonable opportunity to read it, (c) the term was ‘onerous and stringent’ in the sense of being ‘inconsistent with the over-all purpose’ for which the contract was entered into by the signer, and (d) the term was unusual in the sense that one would not reasonably expect to find it in an agreement of the type signed. However, the party signing the contract must prove that the other party did not take such steps as were reasonable in all the circumstances to draw the term to the signer’s attention before signing. For such contention, the Plaintiff relies on the cases of The Wing On Properties and Securities Co Ltd v Wave Front Enterprise Ltd [2007] 2 HKC 54 and Citibank (Hong Kong) Ltd v Au Wai Lun, DCCJ 1816/2003, 9 January 2006, applying the test in Tilden Rent-A-Car v Clendenning (1978) 83 DLR (3d) 400. See also Foundations of Contract Law in Hong Kong, Eighth Edition, at pp.297 to 401. Chitty on Contract, 34^th Ed., at paragraph 15–006.

32.  I shall bear in mind the above principles when considering the evidence and the parties’ contentions in this case.

The Plaintiff’s witnesses

Chan Koon Chow(陳冠洲)

33.  Mr Chan says prior to entering into the 1^st Tenancy Agreement in 2012, the leasing of the Property was discussed with the father of Mr Sae, i.e. Mr Ip Senior, and Mr Ip Senior had indicated that the tenancy agreement between the parties would be a standard-form lease (“標準租約”). Mr Chan also says Mr Ip Senior had allowed the Plaintiff to board up the windows and to use the Property as a showroom where the Plaintiff’s goods would be placed.

34.  Mr Chan says he was not familiar with the English language, and the Defendant never explained the contents of any of the three tenancy agreements to the Plaintiff. The Plaintiff said he had not read the details of the agreements save and except the schedules. In particular, he said he would not have agreed to Clause 3.04 of because it was unreasonable. He said this must have been a “trap”, but he agreed that he had not raised this in his pleaded case. He also accepts he signed the agreements without reading them or enquiring about their contents, save for the schedules.

35.  When he entered into the 1^st Tenancy Agreement, it provided that the Property was to be used only for office purposes, and did not state that it could be used as a showroom. However, he said he had already informed Mr Ip Senior of the intended use and he did not have any objection to such use. In any event, this does not seem to be an issue to be resolved in this case.

36.  He also said he does not remember whether any of the three agreements was signed at the office of a firm of solicitors. Neither does he remember whether a draft tenancy agreement was provided to him through a staff member of the Plaintiff, one Elaine Au, as put to him in cross-examination, prior to signing any of the tenancy agreements. He nevertheless accepts that the terms of the tenancy agreements must have been discussed and was dealt with by a staff member of the Plaintiff.

37.  Mr Chan further says that prior to entering into the 1^st Tenancy Agreement, he had inspected the Property but had not taken any photographs at the time, and could only remember that all the windows were closed on inspection. He could not say whether the windows were already damaged at the time. He accepts that, because the windows were boarded up since the beginning of the 1^st Tenancy Agreement in 2012, the Plaintiff never did anything to maintain or repair the windows.

38.  When it was put to him that in fact the 1^st Tenancy Agreement already provided that the windows must not be boarded up, he said he did not know about this term, and that Mr Ip Senior had agreed to let the Plaintiff board up the windows.

39.  In July 2018, when the Property was given back to the Defendant, Mr Chan thought that the Defendant had already accepted vacant possession by receiving back the keys to the Property. However, the Defendant refused to return the security deposit upon demand.

Wong Sau Yan (黃守仁)

40.  Mr Wong is an administrative manager of the Plaintiff, and was already in the employ of the Plaintiff at the material times. He accepts that he had entered the Property prior to the 2012 Tenancy Agreement, but he says he never inspected the Property, nor had he inspected the windows in particular. He said that if the windows had already been damaged, the Plaintiff would not have leased it.

41.  He also said that he oversaw the signing of the three tenancy agreements. He was not sure, in particular, whether any draft of the last tenancy agreement had been sent to the Plaintiff prior to its execution, but said a draft might have been sent to Elaine Au first. He said no one at the Plaintiff’s office had read terms of the tenancy agreements prior to execution.

42.  After the Defendant refused to accept vacant possession upon expiry of the last tenancy agreement, Mr Wong never went back to the Property to verify the damage allegedly discovered by the Defendants.

43.  He acknowledged that there had been maintenance works carried out in relation to the external walls of the building from 2016 to 2018, but could not say whether there was any chance that the application of corrosive materials might have damaged the windows.

44.  He accepts that the Plaintiff had not carried out any repair or maintenance works related to the windows throughout the terms of the three leases, as the windows had all along been boarded up, using only nails but without applying any glue.

Stewart Wong (the Plaintiff’s expert)

45.  Mr Steward Wong, a Chartered Building Engineer and once a Qualified Person with window installation experience, accepts that due to the age of the building and the windows, and if there were problems of corrosion or erosion of the windows, repair of the windows must be approached with extra caution. He accepts that if the windows had not been opened for a long period of time, the chance of corrosion or erosion causing damage to the windows would be higher.

46.  He also accepts that scaffolding may sometimes be necessary in carrying out repair works of windows. Where repair works involved replacement of windows, including window frames, erection of scaffolds would be necessary.

47.  In his opinion, Mr Wong says the repair works suggested by the Defendant’s expert were excessive. In his report dated 2 September 2021, he assessed the relevant costs, including loss of rental for 3 days required for the repair works, in the total sum of HK$20,310.

The Defendant’s witnesses

Sae Wong Suwat (葉家榮)

48.  Mr Sae, a director of the Defendant, accepts that he does have any personal knowledge as to whether Mr Ip Senior has had any discussion with Mr Chan prior to the 1^st Tenancy Agreement as alleged.

49.  He says that the terms of the 1^st Tenancy Agreement were in fact discussed by him and a staff member of the Plaintiff called Elaine Au. There had been email exchanges between him and Elaine Au at the time, but such records have not been adduced. He also said he was the one who had executed all three tenancy agreements on behalf of the Defendant. On reflection, he accepts that the terms of the three tenancy agreements were “tough” (“啃”), particularly in relation to the tenant’s obligation to repair the windows, but as far as he knew, there was no objection coming from the Plaintiff prior to the execution of the same.

50.  He explains that the change in directorship of the Defendant, and hence its ultimate ownership of the Property, was the result of the split of the properties belonging to his parents following their divorce in or around 2011. He did not have any further contact with his father, Mr Ip Senior since then, and that Mr Ip Senior had ceased to be a director and left the company since the divorce.

51.  Mr Sae says that when the former tenant returned possession of the Property to the Defendant, he had checked the condition of the Property, including the windows, and did not find any defects.

52.  Mr Sae says that he may accept vacant possession as long as the Property was returned to him in an acceptable condition. He says that in or around July 2018 when he went to inspect the Property, he found that the damage to the windows were quite serious, and it became necessary to replace the windows. In any event, it would not be cost effective to only just fix the damaged parts of the windows.

53.  According to the quotation from Hoi Chun Interior Design Decoration Works, the Defendant’s contractor dated 18 July 2018[3] for the works carried out by the Defendant to repair the aforesaid damage and the related records, the Defendant had spent a total sum of HK$68,500. However, in cross-examination, he accepts that item 6 of the quotation for the works done for replacing a damaged light box and fluorescent tubes, which is unrelated to the damage of windows, should be deducted.

54.  When it was put to him that other units in the same building had received notices from the Buildings Department in 2014 under section 30C(4) of the Buildings Ordinance, Cap.123 requiring prescribed inspection and repair of windows, with subsequent reminders received in 2019, Mr Sae said he has no recollection of receiving the same in respect of the Property, and denied that the replacements of the windows of the Property was in fact done to comply with such notice.

Lam Tin Sing (林天勝)

55.  Mr Lam, the proprietor of the contractor engaged by the Defendant to do the repair works, stressed the danger of undertaking repairs or replacements of windows without the use of scaffolds.

56.  He also says that given the severity of the damage to the windows by July 2018, including the dislocation of two of the windows, and the loosened handles, it was more appropriate to replace the windows altogether. This would also improve the water-proof function of the windows.

57.  Mr Lam also said that corrosion or erosion was found in most of the windows, and that the refurbishment of the common parts of the building that took place in around 2016 to 2017 during the course of the three leases might have caused the corrosion due to prolonged failure to clean the windows.

Lai Ka Luen Lawrence (“the Defendant’s expert”)

58.  Mr Lai, the Defendant’s expert, a Registered Professional Engineer (Building), a Registered Professional Surveyor (Building Surveying) and a Registered Inspector and Authorised Person (Building Surveying), says that by comparing the historical plans of the building and the photographs of the Property in 2018, he can deduce that the windows of the Property upon the surrender of the Property to the Defendant by the Plaintiff were not the same windows as at the time the building was first occupied.

59.  He also stated in his report that the various statutory requirements for the replacement or fixing of windows required scaffolds to be constructed for safety reasons. He explains that scaffolding is necessary in this instance because of the extent of damage found and the works required to be done.

60.  He said that due to the fact that Working Procedures A6, B6, and C6 under “Minor Works Item 3.6”, being the statutory guidelines provided under the Building (Minor Works) Regulation, Cap.123N refer to the use of scaffolding for repairing window frames to prevent falling of objects and to safeguard the public during repair works, scaffolding should be used in the present case as well. He does not agree that the reference to only to window frames in the guidelines would make any difference if the works in the present case were to replace entire windows, and not just the frames.

61.  However, Mr Lai accepted that the item related to inspection of windows by a Qualified Person was under the Mandatory Window Inspection scheme of the Buildings Department. Such costs should be borne by the owner.

Analysis

62.  First of all, I agree with the Plaintiff’s contention that there is no evidence before the Court that the condition of the windows at the time of the 1^st Tenancy Agreement was problematic.

63.  On the other hand, the Plaintiff accepts that the windows had throughout the period of the three leases been boarded up and the Plaintiff has not done anything to keep the windows under maintenance or repair.

64.  Mr Lam, the Defendant’s contractor, described the state of the windows when he arrived at the Property on 18 July 2018. There are also photographs showing the state of the windows of the Property after possession was delivered back to the Defendant. The actual state of damage of the windows found at the Property as set out at the outset of this Judgment is not seriously disputed. What is disputed is the appropriate measure of the costs of repairs in the event the Plaintiff is liable for such costs.

65.  The Plaintiff contends that as it is the Defendant’s pleaded case that the Plaintiff had to yield the Property back to its original condition, and that under cross-examination Mr Sae of the Defendant agreed that it should be restored back to the level or condition when the 1^st Tenancy Agreement was entered into, the Defendant bears the burden of proof of what level or condition that should be (see So Hon Ming Francis at paragraphs 26 to 27).

66.  On the other hand, it is the Defendant’s case that in breaching clause 3.04, the Defendant should be responsible for the replacing of the windows in any event. The Defendant says it is entitled to deduct the sum the Defendant has spent on replacing all the windows (save for some deductions mentioned above), as well as the loss of rental income during the period of the repair works or renovation.

67.  The Plaintiff submitted that Clause 3.04 itself did not ascribe a responsibility that can be breached. Ms Tang for the Plaintiff argued that Clause 3.04 is subject to the obligation to keep the Property in tenantable repair as stated in Clauses 3.02 and 3.22, which only provide that the Plaintiff was to yield up the Property to the Defendant in “good clean substantial and tenantable repair” at the expiration or sooner determination of the agreement, and that if the tenant had made any alterations, to deliver up the Property in its original condition.

68.  It is further submitted by the Plaintiff that under cross-examination, Mr Sae accepted that it was only necessary to yield up the Property in its original condition. There is no absolute need or obligation to replace the windows if there was any damage, let alone if the purpose of the replacement was at least partly to deal with improving the aesthetics of the Property or to comply with the mandatory window inspection and repair scheme.

69.  In my view, I agree with the Plaintiff’s submission that properly construed, the tenant’s duty to yield up the Property “to its original condition” provided in Clause 3.22 is only one part of the tenant’s obligations. Clause 3.22 provides, where relevant:

“To yield up the Premises…in good clean substantial and tenantable repair and condition in accordance with the stipulations hereinbefore contained…Provided that where the Tenant has made any alterations or installed any fixtures fittings partitions or additions in or to the Premises and notwithstanding that the Landlord’s consent for so doing may have been obtained…the Landlord may at its sole discretion require the Tenant at the Tenant’s sole cost and expense to reinstate or remove or do away with all or any such alterations fixtures fittings partitions or additions or any part or portion thereof…and/or restore the Premises to its original condition…”

70.  However, I am of the view that Clause 3.22 does not overcome the tenant’s other continuing duties to repair, which subsist regardless of the “original condition” of the Property. In any event, there is no evidence that the Plaintiff as tenant has made any alterations to the window structures during the leases, save that it has boarded up the windows, but the boarding has already been removed. Mr Sae of the Defendant also indicated in his evidence that so long as the boarding has been removed, he would accept that. As such, it seems to me that Clause 3.22, or even Clause 5 mentioned above, has little application to the present dispute.

71.  In my view, it is the Plaintiff’s duty to repair the windows, according to the clear provisions in Clause 3.02(a) of the 3^rd Tenancy Agreement that requires the Plaintiff to keep and maintain at its expense all the interior parts of the Property including the windows in good clean tenantable substantial and proper repair and condition, and Clause 3.04, which provides for the Plaintiff’s responsibility for the cost of replacing all broken or damaged windows regardless of whether such damage was due to the Plaintiff’s negligence or circumstances beyond its control.

72.  In any event, the evidence in this case shows that the Plaintiff had viewed the Property prior to executing the 1^st Tenancy Agreement, and accepted its condition prior to agreeing to take up the first lease.

73.  Further, Mr Chan of the Plaintiff said he had not read the details of the 3^rd Tenancy Agreement save and except the Schedules. He said he would not have agreed to Clause 3.04 because it was unreasonable. As such, it was submitted that clause 3.04 should not have been incorporated.

74.  On the other hand, Mr Sae said he communicated with one Elaine Au of the Plaintiff in negotiating the agreement and said there were email exchanges that show that the Plaintiff had read the draft agreement before signing it. However, no such email records have been adduced, and Elaine Au was not called as a witness, nor was her name mentioned until the trial. The Court would not take this part of Mr Sae’s evidence on its face value. In this regard, I note, however, that Mr Wong of the Plaintiff did say under cross-examination that a draft agreement might have been sent to Elaine Au first prior to execution.

75.  Mr Sae also said that Clause 3.04 is tough or onerous and was unusual in that it provides that the tenant must be responsible for replacing the windows of the Property if they were broken or damaged, even if it is out of the tenant’s control.

76.  But even given the above, having considered the evidence, I do not accept the Plaintiff’s stance that Clause 3.04 should be excluded from the agreements. There is no clear, unequivocal and detailed evidence that Mr Chan or the Plaintiff was not given sufficient time to read the contents of each of the agreements before execution, although there is some suggestion that Mr Ip Senior has told Mr Chan that it would be a standard agreement and the Plaintiff could just sign it.

77.  In any event, it is Mr Chan’s own evidence that he did read parts of the agreements when he signed them, and he was not sure whether any of the agreements were signed at a solicitors’ office, although he seems to have agreed that the 1^st Tenancy Agreement was so signed at a firm of solicitors.

78.  Although the Defendant accepts that Clause 3.04 is onerous, it does not appear to me to be utterly inconsistent with the over-all purpose of commercial leases in general. In any event, as I have mentioned, I do not find that the evidence from Mr Chan has unequivocally established that the Plaintiff had not been given a fair chance to ascertain the contents of the agreements prior to execution. In the circumstances, I do not accept the Plaintiff’s contention that Clause 3.04 should be excluded from any of the three agreements.

79.  Given my findings above, I find that the Plaintiff is liable for the costs of repair of the damaged windows under the above-mentioned provisions, and the Defendant is entitled to deduct the amount from the security deposit maintained under the 3^rd Tenancy Agreement.

Quantum

80.  On the question of the appropriate amount of the cost of such repairs, under cross-examination, the Defendant agreed that the sum of HK$68,500 should be reduced. Firstly, The Defendant accepts that item 6 listed on the quotation was not relevant to the claim and the Defendant agreed that it should be deducted, but the Defendant did not suggest a sum. Further, the amount of the quotation also included instructing a Qualified Person for inspecting the windows to fulfil the Mandatory Window Inspection. The Defendant also agreed this is the duty of the owner and the sum should not be borne by the Plaintiff.

81.  The Defendant submitted, which I agree, that the costs of undertaking window repair works with a scaffolding are not so remote as to not have flowed from the Plaintiff’s breach of the 3^rd Tenancy Agreement.

82.  Having considered the assessment of the costs of repairs by both experts, I prefer the assessment by the Defendant’s expert. I am of the view that the amounts assessed by the Plaintiff’s expert are highly conservative, yet on the other hand, I do not find that the amounts assessed by the Defendant’s expert as excessive. According to the Defendant’s expert report, the overall estimated or assessed costs, including loss of rental (for 17 days) amount to HK$67,955.

83.  However, I also accept the Defendant’s stance that replacement of the windows would be a more practical approach in the circumstances of this case. In the circumstances, I would adopt the amount spent, i.e. HK$68,500 for the purposes of this assessment in so far as the cost of works is concerned.

84.  In addition to the loss of rental of 17 days mentioned above, I would allow for the time of approximately one month since the expiry of the 3^rd Tenancy Agreement on 17 July 2018 for the Defendant to liaise with various parties including the Plaintiff, and the contractor in preparing for the repair works to eventually commence in mid-August 2018. Hence, I would allow an overall additional amount representing 1.5 months’ rental under the 3^rd Tenancy Agreement as loss of rental for the Defendant. The amount under this head will thus be: HK$21,000 x 1.5 months = HK$31,500.

85.  However, the cost of inspection in the amount of HK$3,000 by a qualified person prior to carrying out repair works, which was understood as inspection carried out under the mandatory inspection scheme should be deducted. There is no evidence concerning the cost of replacing the light box and light tubes (i.e. Item 6 in the quotation mentioned above). The Court is thus not in a position to fix an amount to be deducted. In any event, as a matter of common sense, this item ought not to have been substantial. I would allow for a further reduction of HK$500 for this item.

86.  Further, I agree with the Plaintiff that the Court should take into account that replacement of the windows, which was what had eventually taken place, would be an overall betterment for the Defendant, and a discount should be applied (see e.g. Wong Hon Kam Henry v Tak Yi Investment Limited, DCCJ 345 of 2015, 2 June 2016). In any event, as the Plaintiff submitted, there is also some evidence suggesting that the replacement was probably also carried out with an intention to satisfy the mandatory window inspection scheme of the Buildings Department.

87.  As such, taking a broad-brush and common sense approach, I would apply a discount of 25% on the amount spent, after deducting the amount of HK$3,000 and $500 being the cost of mandatory inspection and replacement of light box and light tubes mentioned above. The amount I find that the Plaintiff is liable for is therefore: (HK$68,500 – HK$3,000 – HK$500) x 75% + HK$31,500 = HK$80,250.

Judgment

88.  In light of the above, after setting off the sum Defendant’s counterclaim, I therefore give judgment for the Defendant in the sum of HK$17,250, with interest at the rate of 1% per annum above the HSBC prime lending rate from the date of the issue of the writ to the date of judgment, and thereafter at judgment rate until payment.

89.  This case has been proceeded with by both parties to a trial which took place for four days. Obviously, the cost of this litigation has been out of proportions when seen in light of the relief claimed on both sides. However, since judgment is granted in favour of the Defendant, I also make an order nisi that the Plaintiff shall pay the costs of the Defendant in this action, with Certificate for Counsel for the trial, to be taxed if not agreed.

90.  Lastly, it remains for me to thank counsel for their assistance.