CHEUNG SO IN KAY v. OBERLIN COLLEGE LTD

1985, No. A5355

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is a claim by a landlord for vacant possession of the leased premises, arrears of rent, mesne profits, property tax, repair and restoration of dilapidations, and removal of certain items fitted by the tenant or damages in lieu. The Plaintiff is an elderly lady, who owns the premises which consist of six floors of a building in Shaukiwan. The Defendant is a limited company which runs a school known as the Oberlin College in the premises. By a tenancy agreement dated 29th June 1983 the Plaintiff let the premises to the Defendant for a fixed term of two years from 1st September 1983 to 31st August 1985 at the monthly rental of HK$90,000 exclusive of rates. The rent was to be paid in advance on the first day of each calendar month. The Defendant fell into arrears in the payment of rent and by a letter dated 23rd April 1985 the Plaintiff's solicitors exercised her right of re-entry under the Tenancy Agreement. On the 28 August 1985, the Plaintiff instituted the present proceedings.

2. The Defendant denies the claim, but it is significant that it has done so essentially and almost totally upon the sole ground that the Defendant on the first day of September 1984 transferred the premises to Professor Steven Cheung, a son of the Plaintiff, with the full knowledge, consent and/or acquiescence of the Plaintiff. On the pleadings, therefore, the major, if not the sole issue between the parties, is whether the premises were so assigned.

3. On the morning of the trial, I made an order declaring that Messrs. Lo, Wong & Tsui had ceased to be solicitors for the Defendant. The reason for that order was because the solicitors were no longer able to obtain instructions from the Defendant. The Directors of the Defendant apparently had come to the conclusion that the company could not, by reason of its liabilities, continue its business, and that it was advisable to wind up the company. Accordingly they published a notice in the gazette calling a meeting of the creditors. They did not inform the solicitors. Nor did they attend the trial or seek to be represented. Upon being contacted on the morning of the trial, the most active director, a Madam To, informed the solicitors that the Defendant was no longer able to instruct counsel, that it would have to allow the action to take its own course, and that no one from the company would attend. In these circumstances, I proceeded with the trial of the action upon the application of the Plaintiff, notwithstanding some unease that the parties who might really suffer from the Defendant's failure to defend the action, might prove in the result to be the creditors. I am, however, comforted by the consideration that they are not altogether without remedies, and furthermore that the Plaintiff's legal advisers are well aware of these and have taken them into consideration in deciding to apply for the trial to be proceeded with.

4. As a result of the absence of the Defendant, and of any evidence to support its defence, I have had to decide the issue of assignment almost entirely upon the evidence given by the Plaintiff. In the particulars of its defence, the Defendant alleged that the Plaintiff had acquiesced in the assignment when one Mr. Frank Fung of the Defendant called the Plaintiff at her home by telephone in September 1984, and informed her that the business of the school and, the tenancy were being transferred. The Plaintiff resolutely denied that she had ever consented, agreed or even acquiesced in the transfer whether in writing, as required by the Tenancy Agreement, or orally. Indeed, she denied that she was ever informed of the assignment whether by the school, anyone from the Defendant or even her son, the professor.

5. Mr. Andrew Kan for the Plaintiff very properly produced to the court a copy of an assignment which had been furnished to his instructing solicitors by the Defendant's former solicitors. From that copy, it seems pretty clear that on the 1st September 1984 the Defendant and Professor Cheung entered into an agreement, which was subsequently duly stamped, providing for the purchase by the latter of the tenancy and the goodwill of the school for one dollar. Within the limits that I considered proper, and possibly beyond, I tested the Plaintiff on the probability that both her son and representatives of the school or the Defendant must have informed her of the agreement. She stoutly denied this and pointed out that she and her son were not on particularly good terms (not that she was on bad terms with him). She maintained that she would not have countenanced such a transfer as the professor would not have been permitted to engage in such private activities by his employers, whom she thought to be the Government. Nor would she have any part of a scheme which would, in her view, drive him to an early grave. She insisted he was much too busy to engage in that sort of additional activity, and also had to visit America frequently. If evidence had been produced by the Defendant to the contrary, it is conceivable that a different conclusion may have been warranted. But I cannot speculate upon that. I have to decide upon such evidence as is before me. And upon that, there can be only one conclusion. The probabilities clearly show that there was no consent, agreement or acquiescence by the Plaintiff to the assignment. In the result, the defence of the Defendant must fail. In consequence in my finding, the Defendant remains liable under the Tenancy Agreement it entered into on 1st September 1984.

6. Proceeding then to the Plaintiff's individual claims for relief, upon which I have put her to strict proof, the first is her claim for delivery up of vacant possession of the premises. The Tenancy Agreement has now expired. But in any event, Clause 14 provided that if the rent stipulated fell into arrear for one month, it was lawful for the Plaintiff to re-enter by serving written notice. That, in my finding, was effectively done by the Plaintiff's solicitors' letter of the 23rd trial 1985, the rent having prior to that fallen into arrear for several months.

7. The Plaintiff's next claim was for HK$399,102.00 representing the balance of arrears of rent for the period between 1st June 1984 and 31st October 1984. The evidence at the trial established, and it was conceded by Mr. Kan, that the amount should be $180,000.00 i.e. the rent for only September and October 1984.

8. The Plaintiff's next claim was for monthly rent at the rate of $90,000.00 per month from the 1st November 1984 until the date of service of the writ and statement of claim i.e. 20th September 1985. I am satisfied on the evidence that the rent was not paid for this period; in my finding it amounts to the sum of $960,000.00.

9. Next the Plaintiff claims mesne profits at the rate of $90,000 per month from the date of the service of the writ and statement of claim until the date vacant possession is delivered up. In my finding, the Plaintiff is clearly entitled to mesne profits. I am, however, by no means satisfied that this should be at the rate of $90,000. It is now notorious in Hong Kong, and in the interest of justice I believe I should take judicial notice, that the property market suffered a severe set-back in 1983. I think inevitably this must affect the level of mesne profits as the rent of $90,000 per month may well be some way out of line with the reduced rent levels in 1985 and in 1986 relative to those in 1983. I would, therefore, order an enquiry into the amount of mesne profits for this period.

10. Then the Plaintiff claimed property tax at the monthly rate of $9,600 from 1st January 1984 until such time as this court sees fit. Clause 7 of the Tenancy agreement provides that

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If at any time during the term of this Lease Agreement, the rent payable by the Tenant is in arrear for an average period of more than ten days, ... he shall be liable for the payment of the property tax for the related tax year".

In my finding on the evidence, the rent payable by the tenant was in arrear for an average of more than ten days in both the financial years 1st April 1983 to 31st March 1984, and 1st April 1984 to 31st March 1985. For the period claimed in 1984 i.e. 1st January 1984 to 31st March 1984, in my finding the property tax due is $32,400. And for the period 1st April 1984 to 31st March 1985, the property tax due in my finding is $41,194. And for the following 23 days of April 1985 before re-entry was effected, the amount of property tax paid and recoverable, in my finding, is $3,432, making a total of $77,026. Next by its pleadings, the Plaintiff asked for restoration of drainage pipes, plumbing facilities in toilets, and window frames, or alternatively damages in lieu. I am satisfied on the evidence that there was very considerable damage and dilapidations. From the estimates procured by the Plaintiff, I am satisfied that the cost of restoration would be $79,000, and I award this sum to the plaintiff.

11. Then by its pleadings, the Plaintiff asked for removal of various items fitted to the premises. However, at the trial, the Plaintiff abandoned this claim because of the indications of the imminent winding-up and its own failure to procure evidence of the cost of removal.

12. The Plaintiff also asked at the trial for arrears of rates in the sum of $15,940. This was not specifically claimed in the pleadings, and the Plaintiff sought to bring it under the general head of further or other relief. However, in the absence of the Defendants and of specific evidence bearing upon the particular point, I do not think it would be fair to allow such a claim at this late stage notwithstanding an incidental mention of the matter in the Plaintiff's hearsay notice. I accordingly disallow this claim.

13. Finally, the Plaintiff asks for interest and costs. I see no reason why the Plaintiff should be deprived of interest, and I would, upon the arrears of rent, award interest from 1st May 1985 until judgment at prime plus 2%. However, upon the mesne profits and also upon the profit tax awards, I do not propose to order any interest.

14. The Plaintiff is to have her costs.