THE WORLD REALTY LTD v. KWAN NGAR YIN

IN THE COURT OF APPEAL

No. 150 of 1986
(Civil)

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J U D G M E N T

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Kempster, J.A.

1. The defendant in these proceedings was at all material times the plaintiffs' tenant of shop premises at Lucky Plaza, Shatin. Her lease was due to expire on 31st October 1986. For reasons to which I shall in due course refer she wished to surrender her term and on 30th June 1985 wrote to the plaintiffs purporting so to do as from 31st July following. By letter dated 12th July 1985 the plaintiffs made it clear beyond a peradventure that they were not prepared to accept a surrender and that they intended to hold the defendant to her bargain. Nonetheless on 31st July 1985 the defendant wound up her business, locked up her shop for the last time and that evening deposited the keys on a table outside the caretakers' office. This behaviour could readily be construed as a continuing offer to surrender her term. The trial Judge, perhaps surprisingly, found as a fact that the keys were seen and picked up by one of the caretakers and that the plaintiffs' responsible officers soon became aware of the defendant's departure from the shop.

2. The principal subject matter of appeal to this Court is the finding of law by Hunter Jo that the plaintiffs' subsequent failure to return the keys to the defendant, to apply to her for arrears of rent or, indeed, to communicate with her at all, together with their failure to make any relevant entry in the rent-ledger for any period later than 31st July 1985, demonstrated unequivocal acceptance of the defendant's continuing offer to surrender as at that date and, therefore, that there had been an executed contract as between the parties.

3. When a tenant tenders possession of leased premises to a landlord, by delivery of keys for example, as the defendant here did, and the landlord so acts as to inc1icate acceptance of the tenant's tender a surrender of the term results by operation of law despite the absence of a deed and. the presumed common intent of the parties is given effect. Conveyancing and Property Ordinance (Cap. 219) s.4. The critical question for us is whether there was evidence permitting the finding that on or about 31st July 1985, the plaintiffs had accepted the keys of the shop from the defendant as tantamount to delivery of possession. If there was no such acceptance by the plaintiffs then no surrender by operation of law could have taken place until such time, if any, as they took actual possession and thereby became estopped from denying that the tenancy was at an end. Oastler v Henderson[1] per Cockburn C.J.

4. In finding that the defendant effectively handed over the keys of the shop to the plaintiffs, by their caretakers, the trial Judge doubted whether the caretakers attached any significance to the matter. Further, without the additional finding of fact that the keys were accepted as a delivery of possession there could, prima facie, be no finding of law that a surrender had been effected. The findings of fact in relation to the plaintiffs' failure to return the keys or to communicate with the defendant over a period of some eighteen months or of the defendant's notice affixed to the shop door showing her new telephone number are equivocal in their effect and would not suffice. Cannan v Hartley[2]

5. What then of the absence of entries in the plaintiffs' ledger for any period after 31st July 1985 bearing in mind that there was no finding that its content was ever known to the defendant.

6. In my view the absence of entries in the ledger so strongly emphasised by the trial judge signified no more than a recognition by the plaintiffs that no further payments by way of rent were to be expected from the defendant. The words moved out appeared on the previous page to that relied upon. In this context it appears that the trial Judge to a degree misunderstood the effect of the evidence of the material witness called by the plaintiffs. Even taken as a whole these considerations are, in my opinion, a far cry from conduct consistent only with the receipt of the keys by way of surrender or otherwise with the determination of the tenancy; particularly in the light of the letter of 12th July 1985. Nothing was done by the plaintiffs which would have rendered them trespassers if the defendant's tenancy continued as, for example, using the keys to show round prospective tenants, erecting To Let- boards, painting out the defendant's name or actually recovering possession. Phene v Popplewell[3]; Smith v Roberts[4]. For my part I find that there was no surrender by operation of law and that the plaintiffs are entitled to judgment for arrears of rent together with interest as well as management and air-conditioning fees due under the lease from 1st May 1985 until the service of the amended statement of Claim on 6th May 1986; the trial Judge having found that the plaintiffs had not satisfied him that the defendant had failed to pay the rent due for April.

7. Until they forfeited the defendant's interest by service of the amended pleading the amount of rent and of management and air-conditioning fees accrued amounted to some $105,000. From that figure there falls to be deducted by way of set-off a deposit of $15,296 which the defendant, at the commencement of the term, had deposited with the plaintiffs as a guarantee of her obligations under the lease. The defendant claimed a further set-off by way of damages for the loss which she suffered by reason of the plaintiffs' failure to deliver through the air-conditioning system provided for the shop cooled and reasonably pure air during the time that she was in occupation. Justifiably according to the finding of the trial Judge she complained that instead the plaintiffs delivered sickeningly foul air as a result of which her business was virtually destroyed, her income dried up and she had no economic alternative but to vacate.

8. The defendant produced no books or accounts at trial and gave evidence that she had filed no tax returns. She did say that she was running what was described as a downmarket clothing business. She gave figures for turnover in good times as between $1,000 to $2,000 a day and in bad, that is when the smell was at its most repulsive, at $10 to $100 a day. She did not condescend to give a figure for profits. On that evidence the trial Judge boldly found, as I understand his judgment, a loss of turnover of $250 a day between 1st nay and 31st July 1985. How he arrived at that figure is not apparent. But in any event loss in turnover is not to be equated with loss of profit, which is what the defendant alleged by her Defence. A party to litigation who claims special damages for breach of contract must take reasonable steps to prove the relevant figures if that party is to recover more than a nominal sum.

9. In Bonham-Garter v Hyde Park Hotel Ltd.[5] Lord Goddard CJ said:

Plaintiffs must understand that, if they bring actions for damages it is for them to prove their damage; it is not enough to write down particulars, and, so to speak, throw them at the head of the court, saying: 'This is what I have lost; I ask you to give me these damages.' They have to prove it.

These words were quoted with approval by Edmund Davies LJ in Ashcroft v Curtin.[6] I am forced to conclude that there was no evidence which warranted the findings by the Judge first that loss of turnover was to be regarded as a measure of damage and secondly that $250 a day was an appropriate sum to award. Had the defendant claimed expenditure rendered futile by reason of the plaintiffs' breach the situation might have been different. Anglia Television v Reed[7]. I would allow by way of further set-off against the monies due from the defendant to the plaintiffs $50 being a nominal sum marking the plaintiffs' breach.

10. Mr. Chang, who appears for the plaintiffs, has made it plain that although the net sum which they might expect to recover on this appeal would be significantly greater having regard to the matters already canvassed the plaintiffs do not seek judgment in excess of $60,000. In those circumstances I would allow the appeal, set aside the judgment in favour of the defendant for $15,296 given on 7th November of last year and instead enter judgment for .the plaintiffs as against the defendant in the sum of $60,000.

Cons, V.-P.:

11. I agree with my Lord that the appeal should be allowed and judgment entered in the sum of $60,000 as he suggests. With every respect to the learned Judge below the evidence was hardly sufficient to establish that the landlord had even received the keys let alone unequivocalably accepted them as the return of possession. I agree entirely with what my Lord had said and cannot usefully add anything more with regard to the appeal itself. I would only make this observation on a matter that has given me some cause for concern. This appeal was set down by those representing the appellant for two days. Naturally no consultation was held with the respondent who has appeared in person throughout the whole of proceedings both here and below. In fact the appeal has taken something like two hours. I accept that perhaps it could not have been expected that it would go through that quickly but in my view even a most cautious estimate could not have put it beyond one day. It is to be hoped that in future more careful consideration will be given to questions of this kind.

Yang, J.A.

12. For the reasons stated by my learned brethren I too would allow the appeal.