AU WAI YIN, TERESA v. SOTIME LTD

DCCJ10838/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 10838 OF 2000

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Judgment

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(1) The Plaintiff is the tenant of 16/F, Flat C, Block 1 and a carpark space no. G7 of Braemar Hill Mansions, 15-43 Braemar Hill Road, North Point, Hong Kong ("the premises"). The Defendant is a company registered in Hong Kong and is the owner and landlord of the premises.

The Plaintiff's Case

2. According to the Amended Particulars of Claim:-

"3. By an agreement made between the Plaintiff and the Defendant ("the Agreement"), which is partly contained in a written Tenancy Agreement dated 31st March 2000 ("the Tenancy Agreement dated 31st March 2000"), partly contained in an offer letter more particularly described hereinafter and partly oral, the Defendant agreed to grant and the Plaintiff agreed to accept a tenancy in respect of the premises for a term of 2 years commencing from 20th April 2000 at the monthly rental of $30,000 (inclusive of rates and management fees).

4. The Tenancy Agreement dated 31st March 2000 was preceded by the following events.

(a) On 23rd March 2000 and after negotiation between the Plaintiff and the Defendant, the Plaintiff and the Defendant agreed that the premises shall be let by the Defendant to the Plaintiff on the following basic terms and conditions.

"Description of premises :	Tower 1, 16C Braemar Hill Mansion, 15-43 Braemar Hill Road and one covered Carpark Space No. G7.
"Tenant :	Personal lease in the name of Ms. Au Wai Yin Teresa
"Occupant :	Ms Au Wai Yin Teresa and Mr Charles C K Chan
"Rental :	HK$30,000.00 per month, inclusive of Government rates, Government rent and management fee, payable monthly in advance.
"Security Deposit :	HK$60,000.00 equivalent to two months' rental payable upon signing of the tenancy agreement. This deposit shall be held by the Landlord for the term of the tenancy and shall be returned forthwith to the Tenant upon expiry of the same without interest and on the terms and conditions as set out in the tenancy agreement.
"Holding Deposit :	HK$30,000.00 equivalent to one month's rental payable immediately to the Landlord "Taipan Management Co". Upon signing of the tenancy agreement, this sum will be credited towards the first month's rental. Should the tenancy agreement not be signed for any reason, this deposit will be refunded in full to the prospective tenant.
"Lease Term:	To be a two-year lease, with a break clause of two months notice in writing after one year, in the name of "Ms Au Wai Yin Teresa" commencing on 20th April 2000.
"Car Park :	Inclusive
"Special Conditions :	Prior to occupation, it is agreed that you will :-
	1. Check all electric, plumbing, air-conditioning and all utilities (i.e. gas, water, electricity, etc.) and where necessary put in working order.
	2. Sand and polyurethane all wooden floors.
	3. Re-paint the entire premises including all woodwork. (Colour to be advised by Tenant).
	4. Re-grout in kitchen and bathrooms.
	5. Make good any defects.
	6. Make sure the apartment is handed over in a clean and tenantable condition throughout.

(b) The aforesaid basic terms were contained in an offer letter dated 23 March 2000 issued by Chesterton Petty, agent of the Plaintiff, to the Defendant and marked "Subject to Contract"("the said offer letter").

(c) Having received the Defendant's oral confirmation and agreement on the said basic terms and pursuant to the said offer letter, the Plaintiff paid to the Defendant and the Defendant accepted a sum of $30,000.00 has holding deposit on 24th March 2000.

(d) On 23rd March 2000, the Plaintiff had through its agent, Messrs. Chesterton Petty specified the paint to be used and the Defendant agreed to repaint the premises by using the following types of paint.

Particulars

Interior walls of living/dining rooms with ICI Pentalite emulsion 2204

Interior walls of all bedrooms with ICI Pentalite emulsion 2208

Ceilings with ICI Pentalite emulsion 2290

All doors with ICI Satinwood paint 10268

Skirting to all walls with ICI Satinwood paint 10269

(e) As a reminder, on or around 30 March 2000, Messrs Chesteron Petty had sent a To-Do List to the Defendant by fax and had requested the latter to do the following and the Defendant had also agreed to comply with such request.

Particulars

a. remove all blinds and curtain rails, ceiling lamps, shower curtain, gas cooker, disk washer, bed and all other debris

b. replace the mirror boxes in both bathrooms

c. clean all the air conditioners

d. reapply silicon sealant to all windows

e. regrout in kitchen and bathrooms

f. replace all the taps, shower sets and other plumbing in kitchen and bathrooms

g. make good the sliding door opening onto the balcony

h. make good and repaint all doors

i. replace locks on all doors

j. install ceiling lamp in the master bathroom

k. repaint the entire premises including all woodwork and skirting

l. sand and polyurethan all wooden flooring

m. clean the entire premises, in particular remove all cellulose tape marks on windows and kitchen walls

(f) On or about 31st March 2000, the Defendant prepared and delivered to the Plaintiff the unsigned Tenancy Agreement dated 31st March 2000.

(g) On 5th April 2000, the Plaintiff signed and return the Tenancy Agreement dated 31st March 2000 to the Defendant for the Defendant's signature and stamping.

(h) On 5th April 2000 and pursuant to the said offer letter, the Plaintiff paid to the Defendant and the Defendant accepted a sum of HK$60,000.00 as two months' deposit.

(i) In purported performance of the decoration works specified in the said offer letter, the said specifications of paint and the said To-Do-List, the Defendant re-painted the entire premises including all woodwork save and except the iron main entrance gate.

5. By reason of the facts and matters pleaded hereinabove, it is an express term of the Agreement that the car parking space shall be a covered car park space and it is also an express term of the Agreement that prior to occupation, the Defendant shall :-

(a) check all electrics, plumbing, air-conditioning and all utilities (i.e. gas, water, electricity etc.) and where necessary put in working order;

(b) sand and polyurethane all wooden floors;

(c) re-paint the entire premises including all woodwork;

(d) re-grout in kitchen and bathroom;

(e) make good any defects;

(f) make sure the apartment is handed over in a clean and tenantable condition throughout;

(g) re-paint the entire premises including all woodwork with the paint specified in the said specifications of paint;

(h) perform such other decoration and/or repairing works as set out in the said To-Do-List.

6. Further, the Agreement has the following express and/or implied terms :-

(a) that the premises shall be in good and tenantable condition;

(b) that the general condition of the premises shall be of a reasonable standard or a standard commensurate with the class of the building of which the premises form part;

(c) that the decoration and/or repairing works pleaded in paragraph 5 hereof shall be done with reasonable care and skill;

(d) that the decoration and/or repairing works pleaded in paragraph 5 hereof shall be done up to a reasonable standard or a standard commensurate with the class of the building of which the premises form part;

(e) that any decoration works (if any) to be done by the Landlord shall be done with reasonable care and skill;

(f) that any decoration works (if any) to be done by the Landlord shall be done up to a reasonable standard or a standard commensurate with the class of the building of which the premises form part;

(g) that any painting works (if any) to be done by the Landlord shall be done with the type of paint designed for the purposes and with the proper tools designed for the purposes;

(h) that any painting works (if any) to be done by the Landlord shall be done up to a reasonable standard or a standard commensurate with the class of the building of which the premises form part;

(i) that, where the Landlord undertakes to replace the wall paper with emulsion paint, all wall paper shall be properly removed and the wall properly plastered and properly sanded before being painted; and

(j) that, where the Landlord undertakes to re-paint the wooden doors and timber skirting that are originally painted with hand brush paint or synthetic paint, the same shall be re-painted with hand brush paint or synthetic paint.

3. The Plaintiff called two witnesses. One is Miss Ma, formerly of Chesterton Petty, estate agents, who handled the transaction as agent for the Plaintiff. The other witness is Mr. Chan Chiu Kwok, the Plaintiff's husband, who happens to be a professional surveyor and an executive director of Chesterton Petty.

4. According to Miss Ma, she alone negotiated with Mr. Young of the Defendant. Miss Ma stated in evidence that in total 3 offer letters were issued by Chesterton Petty on behalf of the Plaintiff. The first one was issued on 22 March 2000 ("the first offer"). On 23 March 2000, Miss Ma spoke with Mr. Young of the Defendant over the telephone. Mr. Young allegedly said that the first offer was acceptable subject to certain amendments. The second offer letter containing the amendments ("the second offer") was then faxed to Mr. Young that day. Then Miss Ma spoke with Mr. Young who indicated more amendments and a third offer letter ("the third offer") was faxed to Mr. Young the same day. In a subsequent telephone conversation, Mr. Young allegedly confirmed acceptance of the third offer. This third offer is the one referred to in Paragraph 4 (a) and (b) of the Amended Particulars of Claim. It is important to note that all 3 offers were marked "subject to contract". According to Miss Ma, it was standard practice of Chesterton Petty to mark offer letters "subject to contract".

5. The evidence of Mr. Chan Chiu Kwok, apart from confirming that he gave instructions to Miss Ma, essentially deals with the alleged breaches of the Agreement. According to Mr. Chan, the Defendant failed to re-paint the premises with paint as specified by the Plaintiff. Although the premises were re-painted, the standard of workmanship was far below that to meet the express or implied terms of the Agreement. Moreover, the Defendant failed to carry out the work in the To-Do List as expressly or implied agreed.

The Defendant's Case

6. Mr. Young gave evidence on behalf of the Defendant. His evidence tallies with his written statement which says:-

"5. Prior to the execution of the Written Tenancy Agreement, all the negotiations for the terms of the proposed lease were made between me acting on behalf of the Defendant and Miss Lynn Ma of Chesterton Petty Limited, the estate agent acting for the Plaintiff. I did not have any direct contact or discussion with the Plaintiff.

6. It was known to and well understood by me and Miss Lynn Ma of Chesterton Petty Limited that all such negotiations were made on the basis of "Subject to Contract", i.e. any proposed term or condition would not be legally binding on either party until and unless the same had been reduced into writing and contained in a written tenancy agreement to be executed by the parties.

7. During the negotiation process some proposals made by Miss Lynn Ma on behalf of the Plaintiff were rejected by me. These unacceptable proposals included (but were not limited to) break clause, special conditions as to the state of the premises and suggested decoration works. I did make it very clear to Miss Lynn Ma that the Defendant would not accept any of these proposals.

8. During the negotiation Miss Lynn Ma of Chesterton Petty Limited had sent me two letters dated 22 March 2000 and 23 March 2000 respectively. Both letters were marked as "Subject to Contract". This was consistent with what I have said in paragraph 6 above, namely all the negotiations for the terms of the proposed lease were made on the basis of "Subject to Contract". Both these letters were signed by Chesterton Petty Limited alone on behalf of the Plaintiff. The Defendant did not sign any of these letters because:

(a) they contained those unacceptable proposals exemplified above, which were rejected by me as aforesaid; and

(b) only the agreed terms would be reduced into writing and contained in the Written Tenancy Agreement to be executed by the parties.

9. After the negotiation the Written Tenancy Agreement dated 31 March 2000 was eventually executed by Taipan Management Company acting on behalf of the Defendant and the Plaintiff herself to include and contain only the agreed terms of the lease. Such unacceptable proposals as break clause, special conditions as to the state of the premises and suggested decoration works were not included in the Written Tenancy Agreement at all because they were rejected by me as known to the Plaintiff through Miss Lynn Ma.

10. Paragraph 5 of the Covenants/Conditions of the Written Tenancy Agreement did provide for the following renovation works to be made by the tenant herself (i.e. the Plaintiff) at her own costs because this term was agreed by both parties:

(a) renovation of kitchen cabinets, including installation of an exhaust hood;

(b) renovation of closet in the master bedroom; and

(c) renewal of electricity main switch box and all wall sockets, and installation of additional wall sockets.

11. The said paragraph 5 of the Covenants/Conditions further provided that, as mutually agreed, all the above works done at the own costs of the Plaintiff shall become the property of the Landlord (i.e. the Defendant) upon physical vacation of the premises by the Plaintiff.

12. On or about 30 March 2000 Chesterton Petty Limited sent the Defendant by fax a list of the suggested decoration works. However, as mentioned above, these suggested decoration works were rejected by me and this was known to Chesterton Petty Limited. This explained why the Written Tenancy Agreement did not include any of these suggested works and the Plaintiff still executed the Written Tenancy Agreement dated 31 March 2000.

13. Accordingly the Defendant had never agreed with the Plaintiff and/or Chesterton Petty Limited to do any decoration and/or painting works. Therefore the Written Tenancy Agreement did not provide for any decoration and/or painting works to be done by the Defendant at all. Although the Defendant had re-painted the walls and sealed the floors of the premises before the commencement of the said tenancy and adopted the colour preference of the paints suggested by the Plaintiff's said estate agent, none of these works was done by the Defendant in pursuance of any agreed term of the lease. These works would have been done by the Defendant in any event without regard to the lease.

14. The Written Tenancy Agreement only provides for the said tenancy to include carpark No. G7 without stating whether this carpark is a covered space or not."

7. In essence, there are two issues of fact. The first is whether the Plaintiff through Miss Ma or Mr. Chan knew before the signing of the Written Tenancy Agreement dated 31 March 2000 that the car parking space G7 was uncovered. The second is whether Mr. Young did agree over the telephone on 23 March 2000 the terms of the second and third offers. In the light of the circumstances of this case, it is not necessary to make findings on these two issues. However, for completeness sake, I find that, on the balance of probabilities, Mr. Young told the truth. He was, of course, rigorously cross-examined by Mr. Tsu on behalf of the Plaintiff but unshaken. Moreover, his evidence is supported by the offer letters and the Written Tenancy Agreement dated 31 March 2000. The evidence of Miss Ma and Mr. Chan, pretending not to know the number of the car parking space before 31st March 2000, and not to have inspected the car parking space until some time in April 2000 to discover that it was uncovered, is highly incredible. Both Miss Ma and Mr. Chan worked for a reputable professional estate agency. Mr. Chan himself especially has a personal interest in the matter. It is beyond belief that they would have not taken the trouble to ask, well before 31st March 2000, the number of the car parking space if the car parking space was originally included. Mr. Young was just one telephone away and there was no suggestion that he was not readily contactable through the telephone. Miss Ma and Mr. Chan said that they relied on alleged misrepresentation made by Mr. Chan over the telephone that the car parking space was covered. The third offer dated 23 March 2000 specifically stated that the car parking space was covered. However, the Written Tenancy Agreement dated 31 March 2000 omitted the word "covered" for the car parking space. Since the third offer was careful to include "covered", one wonders why the Written Tenancy Agreement dated 31 March 2000 without "covered" was accepted; unless, of course, Miss Ma and Mr. Chan knew by then that indeed the car parking space was in fact not a covered parking space.

The Contract

8. The Amended Particulars of Claim has been quoted in extenso to show that the Plaintiff relies on "the Agreement", i.e. one contract. Nowhere in the Plaintiff's pleadings refers to any collateral contract or collateral agreement. However, Mr. Tsu for the Plaintiff in his final submission discusses "the essence of the oral collateral contract". This is entirely without proper basis. In any event, it will be seen that, in my judgment, it was never the intention of the parties to enter into any contract by oral agreement. The parties intended to bind themselves by a contract to be evidenced in writing.

9. The case, as mentioned earlier, can and should be resolved according to basic principles of contract law adumbrated by Mr. Young of the Defendant.

10. Chitty on Contracts, Volume 1, 28th Edition, Para 2-108 has this to say about agreements "subject to contract":-

" Agreement "subject to contract." Agreements for the sale of land by private treaty are usually made "subject to contract." Such agreements are normally regarded as incomplete until the terms of a formal contract have been settled and approved by the parties. Thus in Winn v. Bull the defendant agreed to take a lease of a house for a specified time as a stated rent, "subject to the preparation and approval of a formal contract." It was held that there was not enforceable contract and Jessel M.R. said, "It comes, therefore, to this, that where you have a proposal or agreement made in writing expressed to be subject to a formal contract being prepared, it means what it says; it is subject to and is dependent upon a formal contract being prepared." Other examples where it has been held that the parties have made the operation of their contract conditional on the execution of a further document are an agreement to purchase freehold land "subject to a proper contract to be prepared by the vendor's solicitors", an agreement to take a flat "subject to suitable agreements being arranged between your solicitors and mine", an agreement to grant a lease "subject tot the terms of a lease" (because this meant "subject to the terms to be contained in a lease executed by the lessor"); and an agreement to purchase a house "subject to formal contract to be prepared by the vendors' solicitors if the vendors shall so require." In each of these cases the court held that the agreement gave rise to no legal liability. On the same principle, it has been held that an agreement to pay a fee to any state agent was not legally binding where it was expressed to be "subject to contract."

Despite her pleadings, the Plaintiff relies on an agreement all the terms of which were actually contained in the third offer dated 23 March 2000. That offer was issued by Chesterton Petty on behalf of the Plaintiff as "subject to contract". Chesterton Petty as professional estate agents can hardly say that they were not aware of the meaning and effect of marking the offer "subject to contract".

11. Miss Ma said in evidence that Mr. Young of the Defendant orally agreed the terms as stated in the third offer dated 23 March 2000. It is on this basis that the Plaintiff contends that there was a binding contract under which the Defendant was obliged to perform. However, the conduct of the parties at the time clearly shows that the parties did not consider themselves to be bound except by a formal written contract. Chesteron Petty issued the first offer on 22 March 2000. On this written offer was a distinctly marked space for the Defendant to sign for acceptance. Prima facie, Chesterton Petty as agent for the Plaintiff intended acceptance to be in writing. On 23 March 2000, twice Miss Ma had telephone conversation with Mr. Young of the Defendant, on both occasions allegedly Mr. Young orally accepted the terms of offer being negotiated. Yet offer letters setting out all the terms, including the terms the subject of dispute in this action, were sent by fax to the Defendant for signature for acceptance. If orally acceptance by Mr. Young for the Defendant was deemed good enough, there would be no need for sending out the second and third offers in writing for signature.

12. Moreover, each of the offer letters was marked "subject to contract". Indeed the "contract" was concluded in the form of the Written Tenancy Agreement dated 31 March 2000. That Written Tenancy Agreement did not incorporate all the terms in the third offer dated 23 March 2000. For instance, the "break clause" originally in all the three offer letters was deleted in the Written Tenancy Agreement. Mr. Chan Chiu Kwok said in evidence that the Plaintiff agreed to delete the break clause because the Defendant agreed to paint the premises according to the colour scheme specified by the Plaintiff. In other words, Mr. Chan tried to justify the deletion of the break clause as a variation of an originally binding agreement. However, if there was already a binding agreement on all the terms stated in the third offer dated 23 March 2000, the Defendant was already bound to re-paint the premises according to the colour scheme to be specified by the Plaintiff, there was no need or no reason for the Plaintiff to agree to delete the break clause.

13. The Written Tenancy Agreement dated 31 March 2000 clearly was meant to include every term finally agreed by the parties. It even included particulars of improvements that the Plaintiff was to make.

14. Taking all factors and circumstances into consideration, the Plaintiff, or rather her agents, at every step took great care to spell out every detail to be included into the contract that was to be concluded. The contract that was actually concluded, i.e. the Written Tenancy Agreement dated 31st March 2000, must, therefore, be taken as containing all the terms and conditions agreed by the parties and the only contract binding on the parties.

15. The Written Tenancy Agreement does not refer to the car parking space G7 as covered. So, quite apart from the evidence of Mr. Young whom I believe as a truthful witness that the Plaintiff and her agents well knew before 31 March 2000 that the said car parking space G7 was uncovered, the Plaintiff cannot say that the Defendant contracted to lease the premises with a covered car parking space. Moreover, since none of the Special Conditions in the third offer dated 23 March 2000 was included in the Written Tenancy Agreement dated 31 March 2000, the Plaintiff cannot hold the Defendant to those terms. Since all the terms as agreed by the parties are stated in the Written Tenancy Agreement dated 31 March 2000, there is in principle no room for implied terms. All the implied terms pleaded by the Plaintiff, I hold, are wholly unfounded.

16. Mr. Tsu for the Plaintiff seems to argue that there was part performance giving life to "the Agreement" reached on the 23 March 2000. The alleged acts of part performance being acceptance by the Defendant of payment of $30,000 and the painting of the premises. So far as the payment of $30,000 is concerned, it is common ground that it is a holding deposit for the Defendant to withdraw the premises from the market pending conclusion of the contract between the Plaintiff and the Defendant. Such holding deposit of course in no way constitutes commitment on the part of the Defendant to lease the premises to the Plaintiff. Even on the wording in the third offer dated 23 March 2000, the Defendant was at all times entitled to refund the holding deposit to the Plaintiff and lease the premises to another party without being liable to the Plaintiff in damages for loss of bargain or otherwise. As to the painting, a landlord is always at liberty to re-paint his property. Painting is in no way a clear commitment referable to a binding agreement to lease.

Implied Covenants

17. Mr. Tsu for the Plaintiff also argues that the Defendant as landlord has a duty implied by law to deliver to the Plaintiff as tenant premises in tenantable repair. If this argument is accepted, because there is expert evidence from the Plaintiff that the painting arranged by the Defendant was grossly sub-standard, the Defendant can be held liable.

18. I have no doubt that the standard of tenantable repair is higher than the standard of fitness for habitation. Chitty on Contracts, Volume 1, 28th Edition, Paragraph 13-016 says that:

" Fitness for habitation: leases. In general, a landlord gives no implies undertaking that leased premises are or will be fit for habitation or for any particular use or that the premises can lawfully be used for any particular purpose. But where a house or flat is let furnished, there is an implied covenant or warranty that it is reasonably fit for human habitation when let, although there is no obligation at common law to keep furnished or unfurnished premises in that condition or to repair them during the tenancy. However, covenants on the part of the landlord are implied in the cases of houses let at a low rent or for a short term."

In the premises, there cannot be any implied undertaking by the landlord that the premises are to be in the state of repair or decoration as contended or expected by the Plaintiff.

19. But Mr. Tsu goes a little further. He submits that the proposition that there is no implied covenant by the lessor to repair or on condition of premises is only a general rule and is subject to many exceptions. One of these exceptions is where the landlord (quoting Woodfall's on Landlord and Tenant, 1-1465 on page 618/9) "has expressly agreed to repair ......". Further, (quoting the last sentence in 1-1465 on page 619 of Woodfall's), "[If] a landlord does in fact execute repairs, he may be liable for injury caused by the negligence of himself or his servants in carrying out the works".

20. The two "exceptions" are not real exceptions. If as Mr. Tsu says the landlord has expressly agreed to repair, obviously the landlord should be held to perform the express undertaking, there would be no case for implied covenant. But, as I have held, the Defendant as the lessor did not expressly agree. As to the case of a landlord being liable "for injury caused by the negligence of himself or his servant", the basis of claim or the cause of action against the landlord or his servant would be one of tort. However, presently the Plaintiff is suing on contract, not on negligence or tort.

21. I have not gone into the cause of the alleged poor finish of painting arranged by the Defendant. It may be that indeed the Defendant's worker simply peeled off the wall paper and painted the walls and the ceiling without re-plastering. However, it was the Plaintiff's wish that the wallpaper be removed. This was done. It was the Plaintiff's wish to have the premises re-painted. Since the Defendant, as I have held, was not contractually bound to do the re-painting, the Defendant could have left the walls and ceiling bare with the old plaster and it should be at the Plaintiff's expense to do the re-plastering. The fact that the Defendant did have the premises re-painted does not mean that the Defendant voluntarily undertook also to do the re-plastering at its extra expense. It is reasonable for the Defendant as landlord to have the premises re-painted as soon as the wallpaper had been peeled off to protect the premises (or more specifically the old plaster) from the elements. There was nothing to stop the Plaintiff from re-plastering and re-painting to her heart's content as she should have done at her own expense. This, I believe, also answers the point about the "as is" state of the premises which Mr. Tsu argued the Defendant ought to have preserved if there was no express undertaking by the Defendant to re-paint.

22. Accordingly, the Plaintiff's claim fails on all grounds. There is, therefore, judgment for the Defendant with costs to be taxed if not agreed.