XCHRX SOUTH PROFIT PROPERTIES LTD. v. CHAN KA WA CARROLL AND ANOTHER

DCCJ2767/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2767 OF 2001

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JUDGMENT

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1. The Plaintiff is and was at all material times the registered owner of the premises known as Shop 4 on the Ground Floor of Victor Court, No. 18 Wang On Road, Hong Kong ("the said premises"). By a tenancy agreement entered into between the Plaintiff as the Landlord and the Defendants as the Tenant dated the 9th day of September 2000 ("the Tenancy Agreement), the said premises was let to the Defendants for a term of three years for use as a snack shop commencing on the 1st day of October 2000 to the 30th day of September 2003 at the monthly rental of HK$22,000.00 for the period from 1st day of October 2000 to the 30th day of September 2002 and at the monthly rental of $26,400.00 for the period from 1st day of October 2002 to the 30th day of September 2003 payable in advance on the 1st day of each and every calendar month (exclusive of rates, management fee and other outgoings) without any deduction or right to set off.

2. According to the Re-Amended Statement of Claim, wrongfully and in breach of Clauses 2.1, 2.21 and 4.1 of the Tenancy Agreement, the Defendants failed to pay the rent, management fees and rates in respect of the said premises for the period from 1st day of December 2000 to 16th day of February 2001, particulars whereof are as follows:-

	Particulars
(a)	arrears of rent at the rate of HK$22,000.00 per month from 1st December 2000 to 16th February 2001
	(HK$22,000.00 x 3 x 2 + $22,000 x 16/29)	HK$56,137.90
(b)	management fees for the premises
	HK$(541 x 3 + 541 x 16/29)	1,921.50
(c)	Rates for January to 16 February 2001
	835 + 835 x 16/29	1,295.70
		$59,355.10
		========

The Plaintiff also claims damages to be assessed for loss of benefit of the unexpired term of the Tenancy Agreement, etc.

3. The Defendants do not dispute that there was the Tenancy Agreement as pleaded by the Plaintiff. The Defendants also admit that they surrendered to the Plaintiff vacant possession (and keys) to the said premises on 16 February 2001. The Defendants, however, contend that they were entitled to rescind the Tenancy Agreement because the Plaintiff did not provide toilets as promised.

4. On 6 January 2001, Messrs. Y.F. Szeto & Lo wrote to solicitors for the Plaintiff in those terms:-

"We act for the above-mentioned tenants and refer to your letter dated 13th December 2000 to our clients.

Pursuant to Part 7 of First Schedule on page 31 of the Tenancy Agreement, our clients have to use the Property "as a snack (sic) shop". Prior to the execution of Tenancy Agreement, your client made representation to our clients that each lavatory in Shop 6 and Shop 7 respectively in Victor Court ("the Building") would serve as the male and female lavatories of the Property. In reliance of the said representation, our clients executed the Tenancy Agreement. After the execution of the Tenancy Agreement, it came to light that the proprietor(s) of the food business in Shop 3 in the Building had already claimed the exclusive use of the said 2 lavatories under his/their food licence. By reason of the said exclusive use, our clients would be unable to apply for their own food licence for their snack food business in the Property.

Accordingly, our clients are not liable to your client for a sum of $22,000.00, being the rental for December 2000 or any rentals payable under the Tenancy Agreement whereas your client is liable to our clients for the total sum of HK$110,000.00, being the rental for October and November 2000 and 3 months' deposit which have been paid by our clients to your client.

In the meantime, our clients demand your client to return the said sum of HK$110,000.00 and reserve all their rights against your client, including but not limited to all costs incurred by our clients due to the Tenancy Agreement.

	Yours faithfully,
	(signed)
	Y.T. Szeto & Company "

5. It is quite clear from the letter by Messrs. Y.T. Szeto & Co. that the ground for rejecting the Plaintiff's claim was misrepresentation before contract. It is trite law that misrepresentation would entitle the injured party to avoid the contract ab initio. Because the said premises were let as a snack shop, it does not require any stretch of imagination to see that the provision of toilet facilities is essential. In the sort of building where the said premises is situated, toilet facilities are not located inside the shops such as the said premises. Instead there are toilet facilities in a part of the common area set aside and constructed for the purpose. It is not uncommon to find, in some buildings like the one where the said premises is situated, that certain toilet facilities are designated for the "exclusive" use of the customers of specified shops. With such understanding, the position (subject to proof) taken by Messrs. Y.T. Szeto & Co. for and on behalf of the Defendants is quite sound.

6. However, the position taken by the Defendants in their pleadings is quite different:-

"DEFENCE

1. According to clause 2.33 and clause 2.47 of the Tenancy Agreement, South Profit Properties Limited, the Landlord, had provided us, the tenant, the use of the 2 lavatories located at shop 9 with toilets' keys delivered to us after signing the Tenancy Agreement.

2. However, the use of the toilets located at Shop 9 are exclusively use by Shop 3 (As confirmed by the reply letter of the Food and Environmental Hygiene Department of the Government of the HKSAR).

3. Therefore, We claim that Sough Profit Properties Limited had wrongfully repudiated and in breach of clause 2.33 and clause 2.47 of the said Tenancy Agreement.

4. Owing to the drawing of the Podium Floor Plan as provided by the property management of Victor Court, We have now clarified by the Food and Environment Hygiene Department of the Government of the HKSAR that the toilets provided by the Landlord for Shop 4, G/F., Victor Court, NO. 18, Wang On Road, Hong Kong should be at shop 9. This clarification has been confirmed and accepted by the landlord's representative, the solicitor, MR. Edmond K.H. Yuen of Messrs. Laurence Pang & Co. during the procedure of the return of the toilets' keys to MR. Edmond K.H. Yuen of Messrs. Laurence Pang & Co. on March 7, 2001, 12:55 noon.

COUNTER-CLAIM

5. Above all, We claim that Sough Profit Properties Limited is now liable to us the total sum of HK$110,000 being the rental for October and November 2000 and 3 months' deposit already paid."

7. In legal terms, the Defendants by their pleadings do not re-assert the ground of misrepresentation. The Defendants do not plead collateral contract. Instead the Defendants rely on express provisions in the Tenancy Agreement. It has to be pointed out that, obviously, the Defence and Counter-claim were not settled by lawyers. The Defence and Counter-claim were signed by the Defendants in person. On this state of the pleadings, the parties' rights and obligations have to be determined in reference to exclusively the provisions of the Tenancy Agreement.

The Tenancy Agreement

8. The relevant parts of the Tenancy Agreement are reproduced below:-

"2.33 Good repair of toilets and water apparatus

At the expense of the Tenant to maintain all toilets and water apparatus as are located within the said premises (or elsewhere if used exclusively by the Tenant his employees invitees and licensees) in good clean and tenantable state and in proper repair and condition at all times during the said term to the satisfaction of the Landlord and in accordance with the regulations of the Public Health or other government authorities concerned.

..........

2.47 Misuse of lavatories

Not to use or permit or suffer to be used the lavatory facilities provided by the Landlord in the said premises or in the common areas for any purpose other than that for which they are intended and not to throw or permit or suffer to be thrown into any W.C. pan, urinal, basin, sink or other lavatory fitting any foreign or deleterious substance of any kind and to pay to the Landlord or demand the cost of any breakage, blockage or damage resulting from a breach of this provision.

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4.16 No warranty of user

The Landlord does not warrant that the said premises are suitable for the said user and/or the operation of the trade or business of the Tenant and should any notice be served on the Landlord by any governmental authority prohibiting the user of the said premises for the trade or business for the time being carried on by the Tenant, the Landlord may in order to comply with any such notice determine this Agreement as any time by giving one (1) month's notice to the tenant and on the expiration of such notice this Agreement shall accordingly determine. In such event, the Landlord shall not be liable to pay any compensation for the loss of goodwill or trade or damage of any kind to the Tenant.

..........

4.21 Entire Agreement

This Agreement supersedes all previous agreements whether oral or in writing express or implied between the parties hereto and sets out the full and entire agreement reached between the parties hereto. Without limiting the generality of the foregoing, no warranties or representations whatsoever relating to the said premises or its state, condition, age, area or the use thereof or the obligations of the Landlord whether express or implied have been made by the Landlord or by any third party on his behalf. If any warranty or representation express or implied has been made, the same is withdrawn or deemed to have been withdrawn immediately before the execution of this Agreement."

9. It is immediately apparent from clauses 2.33 and 2.47 that these two clauses imposed obligations upon the Defendants and did not confer a right to the Defendants to use designated toilet facilities. Taken at it its highest, Clause 2.47 may be construed as giving an implied right to the use of toilet facilities provided by the landlord. But toilet facilities in common areas cannot be said to be provided by the landlord because it is not within the landlord's power to provide such facilities.

10. A letter dated 19th February 2001 from the Food and Environmental Hygiene Department shows that all the toilet facilities in the common areas were already allocated to the exclusive use of other specified tenants on the same floor:-

" Prospective snack food business at
Shop Road, Hong Kong.4, G/F, Victor Court, No. 18 Wang On

I refer to your letter dated 6.1.2001 enquiring the allocation of sanitary fitments to food premises at Victor Court. In response to Points 1 and 2 in para. 3 of your letter, I append below our comments for your information please:-

Point 1

(i) Shop 3, G/F, Victor Court, 18 Wang on Road, North Point, Hong Kong is under application for a light refreshment restaurant licence from this Department. From the documents supplied by the property management, it is noted that the sanitary fitments allocated for exclusive use of Shop 3 are located in the toilets at Shop 9.

(ii) Both Shop 6 and Shop 7 of Victor Court are operated as licensed general restaurants. The sanitary fitments of these two shops as indicated on your enclosed floor plan have been shifted to other parts of the premises and are being used by the licensees concerned.

Point 2

(i) Premises under application for a restaurant licence should be provided with proper flushed toilets. In case of communal toilets, a copy of the approved building plan (or a location plan acceptable to the Director of Food and Environmental Hygiene) indicating the location and the number of communal sanitary fitments in the building together with a letter of confirmation signed by the property management or owner certifying such use by the food premises and the maintenance responsibility thereof shall be submitted to the Director for retention. "

11. Whatever misrepresentation, collateral contract or implied term one might think of in aid of the Defendants, clauses 4.16 and 4.21 provide the Plaintiff with complete immunity. The Defendants' case was hopeless from the start.

12. Accordingly, I found for the Plaintiff on liability and gave partial judgment for $59,355.10 with interest and costs as prayed and I directed that damages be assessed by a master on a date to be fixed in due course.