LEIGHTON PHILLIP JOHANNESEN AND ANOTHER v. CIBEAN DEVELOPMENT CO. LTD.

CACV 37/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 37 OF 1999

(ON APPEAL FROM DCCJ 16790/1997)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is an appeal from H.H. Judge Chan who, on 18 December 1998, resolved in the District Court a dispute between landlord and tenant, over the return of the tenant's rental deposit, in favour of the tenant. (The "tenant", so described in the tenancy agreement, is or are Leighton Phillip Johannesen and Judith Mary Johannesen. The landlord is Cibean Development Company Limited. I shall refer to "the tenant" collectively as "the tenant" and to the individual tenants as "Mr. Johannesen" and "Mrs. Johannesen" respectively. I shall refer to the landlord as "the landlord".) The dispute between landlord and tenant arose out of a special condition contained in the tenancy agreement, the object of which was to enable the tenant to bring the term created by the tenancy agreement to a premature determination in the event of Mr. Johannesen's "relocation" by his employer, Cathay Pacific Airways Limited. The landlord has refused to return the tenant's rental deposit. It contends that a notice of termination given to the landlord purportedly pursuant to the special condition was not a good notice. It also raises an objection to an apportionment sought by the tenant in relation to the last payment of rent before the determination of the tenancy. Having failed in both these respects below, the landlord now appeals to this court.

The facts

2. The facts are as follows.

3. The tenant had for some time been the tenant of a flat 6D Hatton Place, 1A Po Shan Road, Hong Kong, before the date, 26 May 1995, of the tenancy agreement containing the special condition to which I have referred.

4. By the tenancy agreement, the landlord agreed to let and the tenant agreed to take the premises for a term of 2 years from 15 May 1995 to 14 May 1997 at a rent of $52,000 payable monthly in advance. Clause 2 of the tenancy agreement provided, among other things, that the last payment of rent thereunder should be a due proportion of the rent from the first day of the month in which the term expired to the date of expiration of the term.

5. Clause 10 of the tenancy agreement contained a number of miscellaneous provisions, including, in particular clause 10(9). This provided that the terms and conditions or matters set out in the special conditions contained in the Third Schedule to the tenancy agreement should apply to that agreement and be deemed to be incorporated therein.

6. The Third Schedule to the tenancy agreement contains 2 special conditions, of which special condition 2 is the only one to which I need refer. Special condition 2 reads as follows :-

"2. It is hereby agreed and declared that if the Tenant shall on the sole ground of the relocation of the said Johannesen Leighton Phillip by his employer Cathay Pacific Airways Limited out of Hong Kong desire to terminate the term hereby granted at any time after the expiration of the first year thereof and shall after the expiration of the first year give and produce to the Landlord three months' previous notice in writing of such his desire and evidence of the relocation and shall up to the time of such determination pay the rent and perform and observe the terms and conditions on his part hereinbefore reserved and contained then immediately on the expiration of such notice the present tenancy and everything herein contained shall cease and be void but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of the terms and conditions herein contained."

7. On 18 June 1996, Mr. Johannesen sent a fax to the landlord's representative Mrs. Wong, which reads as follows :-

"Dear Mrs Wong,

My company has given me an overseas basing, so in accordance with special condition 2 of our lease on Unit 6D Hatton Place, I wish to advise you that we will be ending our lease on Thursday, 19 September 1996.

I have attached my company's letter of offer of basing for your information.

I will contact you later regarding final arrangements for termination of the lease and I may be able to suggest a party to take up a new tenancy."

8. The "company's letter of offer" to which Mr. Johannesen referred was a letter dated 29 January 1996 addressed to him by a Flight Crew Manager of Cathay Pacific Airways Limited. It reads as follows :-

"Dear Leighton,

North American (Vancouver) Basing :- 400

In response to your recent letter requesting a Basing with a Home Ticketing Port (HTP) of Vancouver, I am pleased to advise you that you may take up this Basing as requested.

Subject to you successfully obtaining the right of residence in Canada, your date for joining Veta will be 12th October 1996 and you should contact the Veta Manager (or his deputy) to obtain further information on the transfer process.

Please contact me when you have finalized the right of residence."

(The reference in this communication to "Veta" is a reference to a wholly owned subsidiary of Cathay Pacific Airways Limited.)

9. It is apparent from the communication of 29 January 1996 and it is the fact that the new "Basing" referred to in that communication was requested by Mr. Johannesen rather than by Cathay Pacific Airways Limited.

10. The landlord refused to accept the fax of 18 June 1996 with the accompanying communication of 29 January 1996 as good notice for the purpose of special condition 2, and the parties thereafter fell out. The tenant surrendered the premises to the landlord and the landlord accepted the surrender under protest. The landlord refused to repay the tenant's rental deposit ($104,000) and objected to the tenant's claim to be liable only for an apportioned part of the last payment of rent.

The issues

11. The issues may, I think, be summarised as follows.

(1) Whether, for the purposes of special condition 2, the "relocation" of Mr. Johannesen had to be involuntary; (2) Whether the communication of 29 January 1996 was sufficient evidence of that "relocation"; (3) Whether the fax (signed by Mr. Johannesen only but which purported to have been given on behalf of himself and his wife) was a notice given with the authority of Mrs. Johannesen; (4) Whether the tenant was right in contending for the right to apportion the last payment of rent under the tenancy.

The first point; "relocation"

12. The difference between the landlord and the tenant may be simply identified. It is this. The tenant says that the "relocation" contemplated by clause 2 may be either voluntary or involuntary. The landlord says that only an involuntary relocation is contemplated by the provisions of special condition 2.

13. I have reached the conclusion that the tenant is correct. If the fact of the matter was that Mr. Johannesen was "relocated" out of Hong Kong by his employer, Cathay Pacific Airways Limited, it seems to me to matter not a jot that that relocation might have been inspired by a request from Mr. Johannesen to his employer, rather than by a request by his employer to Mr. Johannesen. If the "sole ground" is (as it was) the "relocation" of Mr. Johannesen, whether voluntary or involuntary, then, in my judgment, the tenant was entitled to invoke the provisions of special condition 2.

The second point; sufficiency of evidence of "relocation"

14. Special condition 2 requires the tenant to "give and produce to the Landlord three months' previous notice in writing of his [Mr. Johannesen's] desire to terminate the term created by the tenancy agreement" and "evidence of the relocation". The word "and" here means, as I read it, "together with". In my judgment, it was necessary for the operation of special condition 2 for the two things to be done together, that is to say, for the tenant to "give" three months' previous notice in writing if he desired to terminate the tenancy and at the same time to "produce" to the landlord evidence of the relocation. The evidence in question, of course, would have to be sufficient evidence of the relocation. The only question , as it seems to me, is this. Was the communication of 29 January 1996 sufficient evidence of the relocation? In my judgment, it was. I appreciate that the relocation was not to take effect if Mr. Johannesen was unable to obtain a right of residency in Canada. But I do not think it was necessary that Mr. Johannesen should have obtained such right of residency before the tenant became entitled to invoke special condition 2. All that special condition 2 requires is sufficient evidence of relocation, and, as I have said, it seems to me that this communication provided that evidence.

The third point - the wife's authority

15. The landlord says that the judge was wrong to find as a fact, as he did, that Mrs. Johannesen had authorised Mr. Johannesen to give on her behalf the notice given by Mr. Johannesen to terminate the tenancy. As to that, the judge having heard the evidence, said this :-

"... I have before me the unchallenged evidence by Mr Johannesen that he had discussed with his wife before the notice was issued. Because his wife was almost a computer illiterate she agreed to let her husband to issue the notice for both of them. I am satisfied that Mr. Johannesen had authority from his wife to issue the Break Clause notice."

16. The case for the landlord, as I understand it, is that the evidence before the judge was not sufficient for this purpose. It required either that Mrs. Johannesen should come along and give oral evidence that she had authorised the notice to be given by Mr. Johannesen, or that written evidence of her having given that authorisation had to be produced. I see no warrant at all for these requirements. The decision of the judge on the material before him was a decision to which he was perfectly entitled to come and there is nothing in this point.

The fourth point - apportionment

17. In my judgment, the tenant is entitled to an apportionment of the last payment of rent. Clause 2 of the tenancy agreement provides for such an apportionment for the last month before the "expiration of the term". In my judgment, this applies as much to an expiration of the term consequent upon its premature determination by a notice under special condition 2 as it does to the expiration of the term by effluxion of time.

18. For this reason, I would reject the argument to the landlord on this point also.

Result

19. In these circumstances, I conclude that all the judge's conclusions here were correct and that this appeal should be dismissed. I would dismiss it accordingly.

Rogers, J.A. :

20. I agree. I have very little to add.

21. The main point argued was one of construction of the tenancy agreement and for the most part specifically turns upon special condition No. 2 in the Third Schedule.

22. It is said that the notice of termination did not satisfy the requirement because the tenant did not require to terminate the tenancy on the sole ground of relocation but that he wished to emigrate to Canada and that he had, in fact, requested his employer to relocate him to Canada for the purposes of betterment of his career. That calls for a construction of Clause 2.

23. It seems to me that without setting out Clause 2, which has already been recited, that it matters not whether the tenant was relocating under compulsion, voluntarily or at his request because he saw betterment of his position or even for any other reason. What is required is that there was to be a relocation and because of that, the tenants would no longer be in Hong Kong. That was satisfied and the notice was duly served. The relocation being the only ground upon which the landlord would accept the termination.

24. In my view, the notice that was given was sufficient, it appended a copy of a letter from the employer indicating an offer of a new posting. It was the clear and only reasonable inference from a reading of both the notice of termination and a letter from the employer that the tenant was accepting the relocation by his employer.

25. It matters not, in my view, that the tenant was to be employed by another company in the same group as his then employer and, in any event, it was clearly the direction of Cathay Pacific Airways that he was to be relocated.

26. The notice of termination clearly contrasts the use of the word "I" with "we" and, in my view, there is no ground for interfering with the Judge's finding of fact as to Mr Johannesen's authority to issue the notice on his wife's behalf.

27. The final words of Clause 2 of the tenancy agreement, in my view, cover the situation of termination of tenancy under special condition 2 in the Third Schedule and the tenant was entitled to apportion the rent accordingly.

28. In Mr Johannesen's witness statement, he said :-

"In early August 1996, I spoke to Mr. Benny Wong, Mrs. Wong's son and also a director of the Defendant. Once again, I asked what would satisfy the requirements of Special Condition No.2. He told me that his mother was handling the matter and that he was unable to comment. I told him that I saw the Defendant's stance as an attempt to withhold the rental deposit and that I would take legal action to claim for return of the rental deposit. He said that I would not be able to do so as I would be away from Hong Kong, and that considering the legal costs involved it would not be worthwhile to do so."

29. Mr. Johannesen gave evidence. He was not cross-examined as to that statement. There was no evidence from Mr Benny Wong.

30. This approach gives a dishonourable tone to the landlord's conduct which, at the kindest, on the correspondence, can be said to have been unhelpful. Their case, in my view, suffered from the added difficulty that it lacked any fundamental merit.

31. I, too, would dismiss this appeal.

Keith, J.A. :

32. I agree that this appeal should be dismissed for the reasons given by Godfrey J.A. and Rogers J.A. I wish to add a few words of my own relating, amongst other things, to the three issues which arise as to the proper construction of special condition 2 ("the break clause"):

(i) I agree that the tenants' right to terminate the tenancy was triggered by Capt. Johannesen's relocation out of Hong Kong, whether that relocation was prompted by Capt. Johannesen or by his employer. To construe the break clause otherwise would have involved reading words such as "otherwise than at Capt. Johannesen's request" into the break clause which are not there.

(ii) There is an issue whether the break clause was triggered simply by the fact of Capt. Johannesen's relocation out of Hong Kong, or whether it was triggered only if his relocation out of Hong Kong was the tenants' reason for wishing to terminate the tenancy. I have not found that issue entirely easy, but even if Capt. Johannesen's relocation out of Hong Kong had to have been the tenants' reason for wishing to terminate the tenancy, it is plain that it was. True, he may have wanted to fly a different type of aircraft, and his ability to do so required him to be based in North America. But if that resulted in his employer acceding to his request to be relocated in North America, it was his relocation rather than his wish to live in North America which was the tenants' reason for wishing to terminate the tenancy.

(iii) I agree with Mr. Allman-Brown that the break clause should be construed as requiring the tenants to provide the landlord with evidence of Capt. Johannesen's relocation at the same time as the three months' notice of their wish to terminate the tenancy. However, in my view, the letter of 26th January 1996 (a copy of which Capt. Johannesen enclosed with his fax of 18th June 1996) was sufficient evidence of Capt. Johannesen's relocation out of Hong Kong.

33. I should add that it was argued that, since Capt. Johannesen was to be employed in North America by Veta rather than by Cathay Pacific, the relocation was not "by" Cathay Pacific. I cannot accept this argument. His relocation was still "by" Cathay Pacific, his then employer, even if as a result of that relocation he was to be employed by one of its wholly-owned subsidiaries.

34. On the remaining issues relating to Capt. Johannesen's authority to give notice of termination on behalf of himself and his wife, and the apportionment of the rent for the period from 1st to 19th September 1996, I cannot usefully add anything to what has been said in the judgments of Godfrey J.A. and Rogers J.A., but I wish to be associated with Rogers J.A.'s remarks about the conduct of one of the Defendant's directors referred to in Capt. Johannesen's witness statement.