LAU KA KEI v. LAM LAI NGOR and Others

1988, No.A4486

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The issues in this case are clear-cut. It is common ground that there was an agreement struck on 11th March 1988. The remaining issues are : what were the terms of the agreement between the plaintiff and the defendants, and who was in fact in breach. The consensus was for liability to be determined with assessment of damages, if need be, postponed for the master.

2. Acceptance of the alleged breach of the plaintiff has not been specifically pleaded by the defendants. There is little argument that the purport in the general tenor of the defendants' defence is one of acceptance of the plaintiff's alleged repudiation. The evidence from Madam Lam has put it beyond doubt that the contractual relationship between the plaintiff and the defendants came to an end. Clearly, the alleged breach of the plaintiff was accepted by the defendants through Madam Lam. There have been more than a desirable number of applications to amend. If need be, the shortfall in pleading would be treated by this Court as if it had been properly rectified. The dispute involves the rear portion of the 1st floor of No.13 Leighton Road.

3. In 1988 the defendants, trading as "Vogue Beauty Figure Salon (Institution)", were using part of the 1st floors from No.13 - 19 Leighton Road, Happy Valley for its business. Emigration was rife in 1988, and the defendants find it quite unnecessary to keep the entire 1st floor premises for their use. Their business was not running at a profit and rental under the head lease for the Leighton Road premises had to be paid at the end of the month instead of in advance.

4. The plaintiff came to know about the defendants' desire to part with a portion of their 1st floor premises in the press. By pre-arrangement, the parties met. That was on 11th March 1988. It is now agreed that an agreement to let was entered into or agreed by the plaintiff and the defendants through Madam Lam Lai Ngor. A document was signed by Madam Lam on behalf of the defendants for agreeing to let the rear portion of No.13, 1st floor to the plaintiff. The agreement to let these suit premises was partly in writting, at page 18 of the Agreed Bundle, and partly by word of mouth.

5. The plaintiff's and the defendants' evidence on the terms of this agreement to let made on 11th March 1988 does not converge. As far as the plaintiff is concerned, it was supposed to be a two years Tenancy Agreement commencing from the 1st April 1988 on two months' deposit at a rental of $10,000 per month. The defendants' version is that it was to be only a one year Tenancy Agreement, not two, commencing from 16th March. There were other terms for which no specific evidence has been 1ed as regards the occasion of 11th March, for instance the responsibility of the plaintiff for electricity and water charges, the prohibition against the use of the premises for prostitution and gambling purposes, the right to forfeiture, the precise dimensions. The plaintiff claims that it was to be 1,000 sq.ft. with an exclusive staircase area of some 200 sq.ft. The defendants take issue on the claim to exclusive use of the staircase.

6. Those terms came to light when the plaintiff gave evidence on matters relating to other occasions. Reference was made to the right to forfeit by Madam Lam. But the defendants take no point on those other terms save for the exclusive use of the staircase. So, to all intents and purposes, it was an agreement to 1et at $10,000 per month on two months' deposit with the plaintiff paying electricity and water charges on the plaintiff's obligation not to use the premises for prostitution or gambling purposes. The defendants would seem to enjoy a right to forfeit the deposit in default.

7. The terms of the agreement to 1et or rent and the commencement date of the tenancy are, as I have said, matters in serious dispute. Madam Lam, on behalf of the defendants, testified that the tenancy agreement was to commence on 16th March and not 1st April. It was for a term of merely one year and not two. The defendants were keen to have an income from the suit premises as early as possible in the circumstances, and the defendants were in no position, at the material time, to grant a two years' tenancy agreement.

8. I should not prolong the agony any further and for the matters I am about to illustrate and comment on, this Court is virtually left with no alternative but to prefer the evidence of the defendants given through Madam Lam Lai Ngor and Ms Au-Yeung.

9. First of all, the plaintiff's evidence is that the defendants promised two years, though not in effect signing a tenancy agreement for a term of two years. In the beginning, the plaintiff suggested that later, on 30th March, not only did Madam Lam produce a standard printed form of tenancy agreement similar to "P2" in duplicate for signatures for merely a term of one year from 1st April 1988 to the 31st March 1989, but at the same time, she produced one copy Supplemental Agreement for signatures, guaranteeing the plaintiff a two years' security of tenor from 1st April 1988 to 31st March 1990. The alleged standard printed form tenancy agreement was allegedly signed in duplicate and the plaintiff explained to the court that the Supplemental Agreement signed as a single document. Then, the plaintiff changed his version, he told the court that in fact the Supplemental Agreement was also signed on 11th March 1988 together with "Page 18 of the Agreed Bundle" but that it alone was taken away by Madam Lam for stamping. Unless the parties clearly regarded the document appearing at page 18 of the Agreed Bundle as a mere receipt, it would be difficult to understand why that document was not also taken away at the same time by Madam Lam for like purpose. Moreover, no evidence was given as to why a Supplemental Agreement was then ready to be signed with an easily obtainable standard printed tenancy form made available almost 20 days later on 30th March.

10. Initially, the Supplemental Agreement was pleaded as an option granted on 30th March 1988. Both the plaintiff and the defendants suffered from significant inaccuracies in their respective pleadings. But pleading an option on a specific date could not have been attempted without specific instructions from the plaintiff.

11. The plaintiff told the court that he was given four keys, two in duplicate, for gaining access to the suit premises. Ms Au-Yeung visited the premises in early April. She cannot recollect whether the two glass doors for the 1st floor premises of 13 - 19 Leighton Road were then under lock. She entered from No.13. The plaintiff's evidence is that after he was given the keys to the rear portion on 11th March, he even had the locks changed or replaced some three days thereafter on the 14th. And from the 14th onwards, he, the plaintiff visited the rear portion for cleaning air-conditioners and attending to minor electricity problems. He discovered the locks to the premises changed on 11th April. If the plaintiff had been given keys for the staircase said to be exclusively for use of the suit premises and changed the locks on 14th March, when Ms Au-Yeung and her employer visited in early April, they could not have been able to gain access to the premises without the assistance of the plaintiff. That would lead to another aspect of the case. The plaintiff claims that it was a term of the agreement to 1et entered into on 11th March that he was supposed to have an additional 200 sq.ft. in terms of the access staircase. That assertion cannot be said to have been satisfactorily supported by the evidence in this case as it unfolded itself. I find, therefore, that the plaintiff was given no keys, changed no lock and was promised no exclusive use of a staircase.

12. According to the plaintiff, he again met the defendant, Madam Lam, on 30th when the alleged one year tenancy agreement and the Supplemental Agreement were signed. I have referred to the plaintiff's original assertion putting the signing of the supplemental agreement back to 11th March. The plaintiff, so he claims, had been pressing for a tenancy agreement from the defendants ever since the 14th. As from 14th March, the plaintiff allegedly visited the premises daily, spending some hours for cleaning the air-conditioner and attending to other electrical matters. He claims to have since continually brought pressure to bear upon the defendants for signing the tenancy agreement. His case is that it was only on the 30th March that the alleged tenancy agreement finally came to be processed.

13. The defendants, through Madam Lam, explained to the Court that the plaintiff was supposed to present himself to 14th - 16th March for completing formalities of the tenancy agreement. Her idea was to bring the plaintiff to a solicitors' firm for these formalities. He failed to contact Madam Lam until 16th March when he requested one week's extension for completing the formalities. His request was granted. Yet the plaintiff failed to honour his obligation in having formalities completed but re-appeared only on 30th March with the complaint that the one year tenancy was far too short. According to Madam Lam, the plaintiff appeared to be less than sincere even after Madam Lam had given the plaintiff an assurance that on her securing a further grant from the head-lessor, the suit premises would continue to be let to the plaintiff for a further year, obviously with proportionate increased rental.

14. The reasons for the plaintiff's attitude remain unclear today, be it for the short duration of the tenancy agreement, be it for the uncertain increase rental, be it for temporary lack of fund or be it for other matters unknown. In any case, the plaintiff according to Madam Lam, refused to have formalities completed. I accept her version. Madam Lam offered to return the $10,000 deposit which was paid in cash on 11th March. The plaintiff declined. There were other times when the same offer was made to the plaintiff who assumed a similar attitude.

15. The plaintiff, according to Madam Lam, suggested to become a tenant paying rent from month to month. Critcism was levelled by counsel for the plaintiff at this aspect of the evidence as given by Madam Lam. It was submitted, on behalf of the plaintiff, that whilst the plaintiff was more than keen to have security of tenor of more than a year, he would not have reduced himself to a less favourable monthly tenant with an interest enjoying little security of tenor. I note this critcism of counsel with concern. No good answer to it has been given. Invariably, as in this type of cases depending on viva voce evidence on dispute of facts, not every conceivable aspect could be satisfactorily resolved. But I have taken that into consideration.

16. It is not disputed that the plaintiff paid $10,000 cash on 11th March. According to the plaintiff, on 30th March he offered $10,000 cash for the first month's rent and, I believe, on the same day, he made out a cheque in the presence of Madam Lam for $20,000 for the purpose of paying the deposit. These sums are said to have been tendered for the return of stamped tenancy documents. He was less than clear on the precise time for the drawing up of this alleged $20,000 cheque. The plaintiff's evidence is that he had this $10,000 cash and the $20,000 cheque ready on 1st April when he enquired from Madam Lam whether the documents had been stamped. He categorically testified that the $20,000 was drawn in the presence of Madam Lam, but not on 1st April. However, he had paid part deposit on 11th March in the sum of $10,000. Unless the commencement date from 16th March, as in the version of the defendants, has some bearing on computing the payments, thus making the plaintiff liable to pay another month's rent from 16th March, which would absorb the initial cash deposit, on 30th March and 1st April, the plaintiff would not likely have put up $10,000 rent in cash with a full $20,000 (not the balance of $10,000) deposit by cheque. It is not for me to speculate. The plaintiff was himself unable to give any plausible explanation for the tendered $20,000 deposit by cheque.

17. The plaintiff had then in his bank $52. That certainly is no evidence that he was unable to meet his $20,000 cheque or other financial committments through this particular banker. But that would make the circumstances all the more unusual.

18. The plaintiff claims that after 1st April, Madam Lam avoided him, and on 8th April he sent $10,000 cheque by registered post to Madam Lam, but nothing for or towards the agreed rental deposit. Madam Lam admitted the receipt of the registered letter posted on 8th April, but Madam Lam claims that there was nothing but a blank piece of paper enclosed in it. On 15th April, according to the plaintiff, he stopped the cheque. That was because Madam Lam had since 1st April been avoiding him and also the locks were found to have been changed on 11th April. The defendants' case is, as I have earlier said, that apart from one glass door lock replaced by the Japanese tenant, the locks of their premises, including the suit premises, had never been replaced.

19. The plaintiff explains that the cheque he allegedly posted by registered post to the defendants in the sum of $10,000 was intended for rent. The plaintiff admits that his intention had never before been disclosed to anyone. It is difficult to understand why indeed the plaintiff should send any cheque on 8th April and not tendering the same in person to Madam Lam and why indeed only a cheque for $10,000. I prefer Madam Lam's evidence that she was sent a blank piece of paper.

20. The plaintiff reported the disputes between him and the defendants to the police on three occasions. On one of the occasions, the second on 14th April, he claims that he remembered that he had left behind clothings and tools. He had then to seek police assistance for their retrieval. But in his evidence, he was driven to admit that the clothes allegedly left behind were worn or old and the so-called tools crude and simple. It is difficult to fathom the plaintiff's intention in the various reports he made to the police. The plaintiff was also making himself a nuisance after the suit premises together with an additional portion of the defendants' 1st floor premises had been 1et to Japanese tenants, and these his activities had to be restrained by Madam Lam making reports to the police and her soliciting assistance from officer on patrol.

21. I agree with Mr Chung that evidence of the unusually generous compensation allegedly paid to the plaintiff's interior contractor is peripheral.

22. I have commented on the criticism levelled at the aspect of Madam Lam's evidence in relation to the plaintiff's alleged offer to rent the suit premises on payment of monthly rent. I have also taken into consideration the subsequent conduct of the plaintiff which might be said to be consistent with a genuine earlier intention to run a massage sauna. Capital is also sought to be made by counsel for the plaintiff as to the evidence of Madam Lam with regard to whether or not the plaintiff was expressly authorised to enter the premises. From Madam Lam's overall evidence, the plaintiff had not specifically been given any authority to enter the premises. From Madam Lam's overall evidence, the plaintiff had not specifically been given any authority to enter the suit premises after 11th March, but he was known to go in from time to time and only after he had become a nuisance when the relationship of the plaintiff and the defendants turned sour, he had to be stopped and turned away by the staff of the defendants.

23. The plaintiff's version is not in lack of incredible allegations. As I have said right from the inception, this is a case in which I have no hesitation, bearing in mind the criticism and other matters said against the defendants, in preferring the general version of the defendants. Madam Lam was far from being perfect in her recollection and her evidence in court, but in the final analysis as against the poor performance of the plaintiff as a witness, her general version is to be preferred.

24. The defendants had accepted the wrongful repudiation of the plaintiff. Although power to forfeit the cash deposit was claimed by Madam Lam to be part of the terms of the agreement to rent, the defendants had not exercised that power. Virtually at the conclusion of this case, the Court was told that the defendants would not in all fairness forfeit the plaintiff's cash deposit. The plaintiff's claims against the defendants wholly failed with the exception of the claim for the return of $10,000 cash deposit in the circumstances of this case.

25. I, therefore, order that judgment against the defendants in favour of the plaintiff in the sum of $10,000. Save and except for that limited judgment debt, the action of the plaintiff is dismissed with costs to the defendants.

[Submission on Costs]

26. Having heard submission on costs made on behalf of the plaintiff, I do not find it necessary to call upon Mr Wong, counsel for the defendants. It was thought that the defendants would exercise, if not, had exercised, their power to forfeit the cash deposit. I would regard that as a considerate gesture on behalf of the defendants. It was not in any case a portion of the claim of the plaintiff which has been substantiated on the merits. In any case, the substantial dispute in this case between the plaintiff and the defendants is on two conflicting versions. The plaintiff's version has been rejected on the balance of probabilities. No extra time or expense was wasted on the $10,000 cash deposit. In the circumstances, despite the judgment limited to $10,000 granted in favour of the plaintiff against the defendants, the plaintiff's claims must, in the circumstances, be dismissed with costs to the defendants.