THE WING ON PROPERTIES AND SECURITIES CO LTD v. CREATE WEALTH DEVELOPMENT

HCA632/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.632 OF 2004

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J U D G M E N T

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1. This is an appeal by the defendant against the order of Registrar Chan dated 17 May 2005 under which interim payment was granted in favour of the plaintiff under RHC Order 29, rules 10 and 12(b).

2. The payments concerned with the rents and management/air-conditioning fee up to May 2005, government rent and rates up to 30 June 2005 and continuing from 1 June 2005 until the end of the trial in this action in September 2005.

3. The main ground of the appeal is that the defendant has substantial counterclaim for breach of quiet possession and enjoyment of the premises being the subject matter of the lease between the plaintiff as the landlord and the defendant as the tenant.

4. The breach of tenancy agreement in term of interference with the quiet possession enjoyment of the said premises the tenant concerned with the renovation work of the plaintiff to the commercial parts of the building from the G/F to the 10/F and the said defendant was occupying the 4/F for a restaurant.  The renovation work started from March 2005 and according to the allegations of the defendant, it intensified from May 2005 and therefore the plaintiff has breached its obligation to allow the tenant quiet enjoyment of the premises.  They are concerned with the following alleged conduct of the plaintiff, namely :

(a)	blocking of access to the restaurant and the shopping centre;
(b)	reduction of access through the lifts;
(c)	scaffolding on the external walls which reduces the width of the pedestrian walkway, giving the prospective customers the impression that the restaurant is closed;
(d)	turning off the signage lights and lighting in the shopping centre;
(e)	severe disruption caused by welding and metal cutting in the lobby and the higher floors;
(f)	massive water seepage in the restaurant, in the lifts, the dining area and the kitchen;
(g)	lack of general hygiene and deteriorating condition of the hygienic condition of the shopping centre;
(h)	perception that the restaurant would cease trading; and
(i)	substantial reduction of the occupancy rate of the shopping centre giving rise to a reduction in the restaurant business.

5. The defendant alleged that it had suffered substantial losses in business since March 2005 and therefore the unliquidated damages claim would exceed the amount of claims of the plaintiff. 

6. It is also agreed between the parties that the defendant in the past had a record of delay in the payment of the arrears of rent and other charges. 

7. It should be noted that at the time of the hearing before the Registrar on 17 May 2005, the original allegations of the defendant in its counterclaim concerning the breakdown of the air-conditioning and the cut-off power supply were withdrawn by the defendant.  Since then the defendant amended its defence and counterclaim to include the aforesaid allegations and leave was granted by me in this hearing without objection from the plaintiff.

8. The renovation works had already been planned months ahead to commence in May 2005 after the moving out of all other tenants from the G/F to the 3/F.  By then the original tenancy agreement has already expired on 20 May 2005 and the defendant is relying on an alleged “Letter Agreement” by the defendant that the tenancy has been renewed for another two plus two years with a reduced rental, on which the plaintiff is now claiming the interim payment.

9. The renovation works are divided into two phases to reduce disruption to tenants.  The renovation is for the good of all the Shopping Arcade in order to make a new and modernised centre.  Even the defendant itself also admits that the “renovation of the whole building would be advantages to the Shopping Arcade as a whole.”

10. On the legal principles apparently both sides agreed that interim payment should not be granted until and unless the plaintiff demonstrated that even if the plaintiff had failed in its claim, the amount of interim payment would in any event be payable by the defendant. 

11. After hearing the submissions from both sides, I accept the submissions of the defendant and they are summarised hereinbelow.

Temporary interference

12. Temporary interference would not be a breach of the covenant of quiet enjoyment and possession

13. The defendant must prove that the interference must be substantial disturbance to the tenant’s possession and quiet enjoyment in the premises :

“Halsbury’s Laws of England, Vol.27(1), 4^th ed. (Reissue), para.412 at page 391 :-

‘Disturbance of enjoyment which is merely temporary and which does not interfere with the title or possession of the tenant is generally not a breach of the covenant.’

In Manchester, Sheffield and Lincolnshire Railway Company v Anderson [1898] 2 Ch 394

: rendering the access to the premises less inconvenient;

: erecting hoardings which blocked up the thoroughfare;

: incumbering a passage (right of way) for 3 or 4 days which denied the use of it.

At 401 to 402,

‘… I take it that a mere temporary inconvenience caused by a lessor, not in depriving his tenant of a right of way, but in rendering his access less convenient than it was, is not a breach of covenant for quiet enjoyment.  A temporary inconvenience which does not interfere with the estate or title or possession is not, to my mind, a breach of covenant, nor is there any case that goes anything like the length required to shew that it is.  …  But to say that partly blocking up a public street, which is an inconvenience to the public and an inconvenience to any one residing near the place, is a breach of covenant for quiet enjoyment, is going far beyond any authority I am aware of.

It appears to me therefore, that none of these things except the structural injury to the house are breaches of the covenant;”

14. Similarly, the complaints of the defendant in respect of interference and inconvenience in the Shopping Arcade are only temporary interference/inconvenience and they concerned with the allegations of :

(i)	the blocking of the entrances (access);
(ii)	the scaffolding on pedestrian pavement of Hennessy Road (a public road); and
(iii)	the lift services to the restaurant.

15. These temporary interference/inconvenience in any event only commenced in mid May 2005.

16. Further, it has been said that the disorderly conduct on adjoining premises would not constitute a breach of the covenant of quiet enjoyment and possession :

“Halsbury’s Laws of England Vol.27(1) 4^th ed. (Reissue), para.412, at page 391 :

‘412   Breach of covenant for quiet enjoyment

‘… Noise or disorderly conduct on adjoining premises, even if it amounts to a nuisance, may not constitute a breach of the covenant; and the landlord is not liable merely for failing to prevent it, although he may have power to do so under an agreement with the tenant of those premises.’

Further, in Jenkins v Jackson [1889] 40 ChD 71, at 75 to 76 :

‘… the Lord Justice laid down this : - ‘It appears to us to be in every case a question of fact whether the quiet enjoyment of the land has or has not been interrupted; and where the ordinary and lawful enjoyment of the demised land is substantially interfered with by the acts of the lessor, or those lawfully claiming under him, the covenant appears to us to be broken, although neither the title to the land nor the possession of the land may be otherwise affected.’

But that does not seem to me to extend to such a case as was put by counsel in the argument in Shaw v. Stenton [i.e. … water and drainage actually coming into the field demised and making it, uninhabitable, interrupting the actual physical enjoyment.  That seems to be the meaning of the passage.] and dealt with in the way I have mentioned by the Lord Chief Baron.  To my mind, it would be an extension of the meaning hitherto given to a covenant for quiet enjoyment to say that what is really (if it is anything), a nuisance committed on adjoining land (because the room above is in that sense adjoining land) by the lessor or his tenant, is a breach of the covenant for the quiet enjoyment. …

With that observation of his I entirely concur, but in order to justify the specific performance in the shape of an injunction, you must first shew that the covenant has been broken.  In order to shew that it has been broken, you must shew that the act complained of comes within the meaning of the covenant, and for the reasons which I have endeavoured to explain, I do not think that in this case there has been any breach of the covenant.”

17. In any event, in the present case on the G/F, which is adjoining land to the 4/F of the restaurant, the plaintiff had taken the following reasonable and practicable measures in order to reduce the interference or inconvenience, namely :

(1)	the contractor had placed a high power static exhaust fan to extract the smoke generated by the welding work to the rear staircase;
(2)	there was unavoidable little amount of smoke emitted from the G/F to other areas;
(3)	the plaintiff’s contractor in charge Messrs Jones Lang LaSalle has been inspecting the work area on regular daily basis and there was no irregularity reported by them; and
(4)	the cases of complaint referred to by the defendant on five days in the latter part of May 2005 were under the control of the management office.

18. Further, the plaintiff has taken reasonable measures to reduce inconvenience in respect of the allegations of blocking of entrances, scaffolding erected on pedestrian pavement and hoardings, and reduction in lift services.  In summary they are as follows :

(1)	Blocking of entrances :
	(a)	at Lockhart Road was only temporarily for few hours only;
	(b)	the internal staircase at 3/F leading to the 4/F restaurant was closed since the 3/F was vacant and the staircase was not leased to the defendant;
	(c)	the entrance on the 2/F through the overhead bridge with escalator to the upper floors was closed simply because all tenants on the 2/F had moved out; and
	(d)	the entrance at the Hennessy Road being the main approach road has always been open.
(2)	The scaffolding on the pedestrian and the hoardings there was for the safety of the pedestrians because of works on the canopy above the pavement.  The hoardings were maintained to a minimum area for a short period with directional lights and promotion posters thereon over the Shopping Arcade.
(3)	The lift services were maintained with two out of three lifts working and one cargo lift although there was only one tenant and that is the defendant on the 4/F as opposed to many other tenants on the G/F and the first three floors in the past.  There was also an additional passenger lift in the office lobby going to the 4/F of the restaurant.
(4)	The defendant also maintained all other facilities as usual in terms of electricity, air-conditioning, cleaning, pest control.  These were all maintained without suspension.

19. In any event the landlord under the previous tenancy agreement has its right to renovation under clause 8.2 of the tenancy agreement. 

20. In assessing the merit of the defendant’s case I consider that the learned Registrar has exercised his discretion judicially and I would exercise my discretion in the same way in this de novo hearing.  The defendant’s principal defence is relying on the aforesaid letter of agreement dated 25 February 2004.  However, this is only the proposal by the defendant and the letter specifically stated to be “subject to contract”.  The parties had never signed any formal contract thereafter.  Even the defendant itself had failed to comply with its committed payments as stated by itself at the bottom of the said letter.  Further, the defendant’s new alleged acts and conduct of breach of the plaintiff only occurred in the latter part of May 2005 and most of them were after the interim payment hearing on 17 May 2005.

21. It is also doubtful whether the alleged loss of business were due to the plaintiff’s renovation works.  The plaintiff’s alleged loss was from January 2005 to April 2005 but the actual renovation work only started in May 2005.  It is therefore very doubtful whether its losses were due to the renovation work which had not yet commenced.  Since the renovation work the property management company made headcount from 18 May to 8 June and the daily headcount was over 1,000 customers.

22. Accordingly, I accept the plaintiff’s submission that there is no convincing supporting evidence that the defendant’s business loss was caused by the fault of the plaintiff.

Conclusion

23. By reason of the aforesaid matters, this appeal is dismissed with costs to the plaintiff.

24. There was a part-heard application for stay of the Registrar’s order before the Registrar which will resume on 29 June 2005.  Mr Jin Pao, counsel for the defendant, has very fairly pointed out that that hearing is now overtaken by the event of this appeal and the defendant’s aforesaid application before the Registrar should stand dismissed, the hearing day on 29 June should be vacated, with costs of that application be to the plaintiff.