LEUNG SHING YIN AMBROSE v. DORRO PROPERTIES LTD

DCCJ 16/2017

[2019] HKDC 1671

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 16 OF 2017

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JUDGMENT

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Introduction

1.  Dorro Properties Limited (“the Company”) is the registered owner of a residential building known as Wellgan Villa situate at Nga Tsin Wai Road, Kowloon City (“the Building”). Mr Leung was a tenant of Flat 6A of the Building (“the Old Unit”) from 31 July 2015 to 7 August 2016 pursuant to a lease (“the Old Lease”) granted under the written tenancy agreement (“the Old Tenancy Agreement”). Mr Leung brought this action to claim for the return of the rental deposit in the amount of HK$92,000 paid pursuant to the Old Tenancy Agreement (“the Old Deposit”).

2.  The Company has an even larger claim against Mr Leung. Its claim is based on an alleged oral agreement to rent another unit of the Building, viz, Flat 10B (“the New Unit”) at the same rent for another year upon expiry of the Old Tenancy Agreement (“the Oral Agreement”) and the Old Deposit was agreed to be converted into the rental deposit of the new tenancy (“the New Deposit”). However, Mr Leung repudiated the Oral Agreement and did not take up the new tenancy. The Company claims by its counterclaim against Mr Leung for the forfeiture of the New Deposit (converted from the Old Deposit) and damages for his breach of the Oral Agreement.

Main Issues

3.  The following issues arise for my determination:

(1)     Did the Oral Agreement come into existence (“Existence of the Oral Agreement Issue”)?

(2)     If so, was there part performance of the Oral Agreement on the part of the Company such that the requirement of a written lease under section 3(1) of the Conveyancing and Property Ordinance, Cap. 219 (“the CPO”) could be waived thereby rendering the Oral Agreement enforceable (“the CPO Issue”)?

(3)  If an enforceable agreement in the form of the Oral Agreement existed, did Mr Leung repudiate the same and was any repudiation accepted by the Company (“the Repudiation Issue”)?

(4) If so, is the Company entitled to forfeit the Old Deposit and/or the New Deposit and what is the quantum of damages payable by   Mr Leung to the Company (“the Relief Issue”)?

Background facts

4.  I shall first make a summary of background facts so that the evidence relating to the foregoing issues can be examined in context. The following matters are either undisputed at trial or indisputable in light of uncontroversial documentary evidence.

5.  Mr Leung was educated in Canada. He works for AMPCO Industries Ltd. (“AMPCO”) which is a local company trading in camping and outdoor activities equipment. Mr Leung’s parents are equal shareholders of AMPCO and Mr Leung works as its director of product and business development. 

6.  He acquired some legal knowledge during his studies and he is proficient in English. He prepared all the legal documents in English and all along has acted in person in these proceedings.

7.  The Company has an office dealing with rental matters on the 3^rd floor of the Building (“the Office”). At the material times, the Office was manned by Mr Po, a clerk, an accounting staff and a computer operator. Mr Po is actually employed by Wellgan Investments Ltd. (“Wellgan”), which is the parent company of the Company. Mr Po is responsible for dealing with estate agents and prospective and current tenants of the Building.

8.  On 21 July 2015, Mr Leung signed a provisional agreement for tenancy for the Old Lease (“the Old Provisional Agreement”). The Old Provisional Agreement was in the standard form of an estate agent through which Mr Leung contacted the Company and was arranged to inspect the Old Unit. The amount of the Old Deposit was stipulated to be HK$92,000 in the said agreement. Upon signing the Old Provisional Agreement, Mr Leung paid to the Company a sum of HK$46,000 being half of the Old Deposit as initial deposit.

9.  Pursuant to the Old Provisional Agreement, Mr Leung and the Company signed the Old Tenancy Agreement on 31 July 2015. It contained the full terms of the Old Lease and was duly stamped. Upon signing the same, Mr Leung paid to the Company the balance of the Old Deposit in the sum of HK$46,000 and the like sum as the rent of the first month.

10.  At the request of Mr Leung, the washing machine and the refrigerator were removed from the Old Unit for the purpose of the Old Lease since Mr Leung preferred to use his own devices. Therefore, the two electrical appliances were deleted from the Third Schedule to the Old Tenancy Agreement.

11.  Mr Leung has a young family with two children and his family resided at the Old Unit under the Old Tenancy Agreement with his domestic helper. In or about June 2016, when the Old Lease would soon expire in two months’ time, Mr Po recommended the New Unit to Mr Leung. They went to the New Unit to have an inspection. The Oral Agreement is alleged to come into existence after the inspection.

The Issues

12.  I shall first focus on the Existence of the Oral Agreement Issue and the CPO Issues. At the outset, I examine the parties’ respective pleaded case on these issues.

13.  The Company alleges that the Oral Agreement existed. In its pleading, it is alleged that Mr Leung expressed his satisfaction with the New Unit to Mr Po after the inspection and subsequently, they entered into the Oral Agreement. The Oral Agreement allegedly contained the following terms:

(a) rent payable will be HK$46,000 per month;

(b) term of the tenancy to commence on expiry of the Old Lease and to last for one year (“New Lease”);

(c) the Old Deposit is to be kept by the Company as New Deposit for the New Lease;

(d) all other terms shall be the same as the standardised terms to be found in the Old Tenancy Agreement;

(e) parties to execute a written tenancy agreement incorporating the above terms to evidence the binding oral agreement.

14.  The Company allegedly delivered to Mr Leung a copy of a tenancy agreement incorporating the terms of the Oral Agreement on 23 June 2016 (“the 1^st Tenancy Agreement”) by Mr Chiu who was a staff of the management office of the Building.

15.  On 28 June 2016, Mr Leung asked Mr Po to reduce the monthly rent of the New Lease to HK$45,000. The Company agreed to the reduction and the Oral Agreement was varied accordingly.

16.  The Company prepared an amended tenancy agreement reflecting the variation (“the Amended Tenancy Agreement”) and endorsed it with the chop of the Company stamped thereon.

17.  On 4 July 2016, the Amended Tenancy Agreement bearing the chop of the Company was delivered again by Mr Chiu to Mr Leung for his endorsement. Mr Leung indicated that he would sign and return the Amended Tenancy Agreement to the Company on or before 17 July 2016.

18.  On 7 July 2016, Mr Leung made a request for the following works to be carried out at the New Unit (collectively “the Requested Works”):

(1) Cleaning of the entire New Unit;

(2) Inspection of all the air conditioners inside the New Unit;

(3) Removing the washing machine and the refrigerator from the New Unit so as to make room for his own equipment; and

(4) Applying adhesive to fill the gaps between the skirting and the walls of the New Unit.

19.  The Company agreed and did complete the Requested Works by 15 July 2016 by its contractor.

20.  The Company relies on the following matters as part performance of the Oral Agreement:

(1) the completion of the Requested Works;

(2) making the New Unit available for the exclusive possession of Mr Leung as per the terms of the Oral Agreement;

(3) refraining from putting the New Unit on the market for lease.

21.  Now I turn to the pleaded case of Mr Leung on these two issues. I do not intend to recite the pleadings of Mr Leung at great length here and I shall just deal with his specific response to the allegations in respect of the two issues.

22.  Mr Leung admits having an inspection of the New Unit in late June 2016 but he denies he made the Oral Agreement. He accepts that a few days after his inspection he received the 1^st Tenancy Agreement from a security attendant of the Building but he maintained that it was a mere proposal made by the Company. He further alleges that he later phoned Mr Po and told him that he did not accept, among other things, the rent and the conversion of the Old Deposit and so the 1^st Tenancy Agreement would not be signed.

23.  Mr Leung also agrees that he received the Amended Tenancy Agreement from a security attendant of the Building later but he denies having agreed to the terms therein with the Company. He contends that it was only an agreement to enter into an agreement.

24.  Mr Leung goes on to allege that on 11 or 12^th July 2016 at the Office, he returned to him all the tenancy agreements relating to the New Unit without his signatures and counter-offered a monthly rent of HK$42,000 for the New Lease. He told Mr Po that if the Company accepted his counter-offer, he would make an appointment to sign a formal tenancy agreement for the New Lease.

25.  In regard to the Requested Works, Mr Leung says that he did not agree with the Company that they should be carried out. The Company merely completed them on its own initiative.  

26.  Mr Leung relies on a document written in English dated 22 July 2016 (“the Confirmation”). Mr Leung created this document and it contained a confirmation that the Old Tenancy Agreement was the only agreement accepted by and entered into between the parties and that there was no other agreement accepted by or entered into between the parties. Mr Leung signed on it and a chop of the Company was stamped thereon as an acknowledgement by Mr Po.

27.  Now I turn to the evidence. Mr Leung and Madam Wong, who is his mother, testified. Mr Po was the only witness of the Company. Madam Wong’s evidence was brief and what she was told during the delivery of vacant possession of the Old Unit by a staff of the Company cannot have no bearing on any of the issues at all.

28.  Mr Leung appeared to be a courteous and thinking person when he testified. However, his assertions could not bear scrutiny and was inconsistent with his own documentary evidence, as will be explained below. Mr Po on the other hand impressed me as a straightforward and forthcoming person eager to tell the court the whole truth. His evidence is largely supported by contemporaneous documents including the entries in the logbook kept at the Office (“the Logbook”). He was a credible witness in my judgment. I have little hesitation in accepting his evidence and I am inclined to prefer his evidence wherever it conflicts with those of Mr Leung.

The Existence of the Oral Agreement Issue

29.  Mr Po made the following entry, among other things, at the Logbook for 21 June 2016 in the Chinese language:

合勤 6A $46,000    簽一年搬上10B   車位 P9

(My translations: Wellgan 6A $46,000 sign for 1 year move to 10B Parking space P9)

30.  Mr Po made the following entry at the Logbook for 22 June 2016 in the Chinese language:

合勤 6A搬到10B簽一年 OK

合勤 6A同意把按金轉到10B

(My translations:

Wellgan 6A move to 10B sign for 1 year OK

Wellgan 6A agreed to convert deposit to 10B)

31.  Lastly, Mr Po made the following entry at the Logbook for 28 June 2016 in the Chinese language:

合勤 6A 續租一年 $45,000 OK 搬到10B

(My translations:

Wellgan 6A lease extended for 1 year $45,000 OK move to 10B)

32.  Ms Wong, for the Company, rightly points out that the authenticity of these entries in the Logbook is not challenged. She submits that these authentic written entries are of the greatest importance in assessing credibility of the witnesses, citing in support thereof Hui Cheung Fai v Daiwa Development Ltd (unreported, HCA 1734/2009, 8 April 2014).

33.  I agree with her submission. These self-explanatory written entries lend substantial support to the evidence of Mr Po in respect of the conclusion of the Oral Agreement including the subsequent variation by way of reduction of monthly rent.

34.  On the contrary, the evidence of Mr Leung is not credible. I do not believe that during his inspection of the New Unit, Mr Po made a quotation of HK$45,000 as monthly rent. This is inconsistent with the written record and there is no reason why Mr Po had to make a false record. Nor do I believe that the 1^st Tenancy Agreement was sent to him only as a proposal. Without a binding agreement, I do not think the Company would bother to prepare a written tenancy agreement with its chop stamped thereon.

35.  Moreover, had Mr Po suggested HK$45,000 to Mr Leung during the inspection, there is no reason why Mr Leung did not confront Mr Po with the alleged oral quotation when he found out that in the 1^st Tenancy Agreement the new rent would be HK$46,000. I reject his evidence that he called Mr Po and told him that the terms of the 1^st Tenancy Agreement could not be accepted. I prefer Mr Po’s evidence in this regard.

36.  I must reject Mr Leung’s evidence that he returned to Mr Po at the Office the 1^st Tenancy Agreement and the Amended Tenancy Agreement on 11 or 12 July 2016. If he had done so, there is no reason why he did not refer to this in the Confirmation, which was drafted by him in a careful language with a clear purpose to serve.

37.  More importantly, Mr Leung could not explain why he sent a text message by WhatsApp to Mr Po on 5 August 2016 to tell him that he had destroyed the documents relating to the New Unit due to the refusal of AMPCO to grant him housing allowance. This text message completely contradicts his pleaded case and his evidence in his witness statement. I accept Mr Po’s evidence that Mr Leung has failed to return the two Agreements to the Company despite its repeated requests including but not limited to its Whatsapp messages dated 3 August 2016, its letter dated 10 August 2016 (“the August Letter”) and an undated letter.

38.  Both the August Letter and the undated letter were sent to Mr Leung by Whatsapp and by post and the Company sent them to Messrs Tang, Lee & Co. (“TL”), the former solicitors for Mr Leung as enclosures to its letter dated 13 September 2016 (“the Reply Letter”). The Reply Letter was made in reply to the demand letter issued by TL dated 6 September 2016 on behalf of Mr Leung.

39.  In the first place, the August Letter is another contemporaneous document of the Company. It contained very similar if not identical allegations against Mr Leung.

40.  Mr Leung in his pleadings refers to the August Letter and alleges that the pleaded allegations of the Company differ from the contents thereof. Quite on the contrary, I find the August Letter to be consistent with and supportive of the pleaded case of the Company.

41.  Mr Leung produced a letter issued by AMPCO dated 4 July 2016 purportedly in support of his allegation that his monthly housing allowance could not exceed HK$40,000 and so he could not have agreed to pay the new rent under the New Lease.     

42.  According to both Mr Leung’s pleadings and the August Letter, Mr Leung asked the new rent to be fixed at HK$42,000 on 11 or 12 July 2016 despite the alleged maximum amount of his housing allowance stipulated in the letter of AMPCO issued earlier. I do not think the letter could assist Mr Leung in any way. If anything, it shows that Mr Leung was indeed able to afford and offer to pay a monthly rent exceeding the maximum amount of his housing allowance. In other words, the maximum amount of his housing allowance had little correlation with the amount of rent to which he could agree to pay.   

43.  I have not lost sight of the Confirmation. Mr Po admits having stamped the chop on the Confirmation. However, he avers that he did not understand its content and he merely acknowledged the receipt of the same. I accept his explanation. He only received junior secondary education. I cannot accept that he could be capable of endorsing the contents of the Confirmation, which, English proficiency aside, actually involved a legal question. Further, there is no evidence that he was authorised to agree to the said contents on behalf of the Company when he stamped the chop on the Confirmation.  

44.  In any event, even if the Company had agreed to the Confirmation, I do not think it would be estopped from insisting on the existence of the Oral Agreement in these proceedings.

45.  Having accepted the evidence of Mr Po on the Existence of the Oral Agreement Issue in its entirety, I now turn to the relevant contractual principles. Mr Leung pertinently refers to World Food Fair Ltd v Hong Kong Island Development Ltd (2009) 9 HKCFAR 735. There, Mr Justice Ribeiro PJ made a few observations relevant to a finding of a concluded contract.

46.  First, for the essential terms of a concluded contract, Ribeiro PJ had this to say at §16:

“At the trial, there was considerable discussion as to whether the parties had agreed the “essential terms”.  Used in a technical sense, that expression is usually understood to refer to the minimum terms which must be agreed before there can be a concluded agreement for any lease, in other words, terms which are essential to leases in general.  These are the terms dealing with (i) the identity of the parties; (ii) the premises to be leased; (iii) the commencement and duration of the term; and (iv) the rent or other consideration to be paid.  Additionally, for there to be a concluded contract for the grant of a particular lease, the parties must reach unconditional agreement on all the terms that they intend to have in the particular lease.  In Rossiter v Miller (1878) 3 App Cas 1124 at 1151, Lord Blackburn recognized this distinction, referring to the minimum essential terms as the “cardinal points of the contract” and to those required by the parties to be included as the “essential terms”:

“...it is a necessary part of the Plaintiff's case to shew that the two parties had come to a final and complete agreement, for, if not, there was no contract. So long as they are only in negotiation either party may retract; and though the parties may have agreed on all the cardinal points of the intended contract, yet, if some particulars essential to the agreement still remain to be settled afterwards, there is no contract. The parties, in such a case, are still only in negotiation.”

47.  Then, Ribeiro PJ refers to the dictum of Ma CJHC (as he then was) in the decision of the Court of Appeal under appeal ([2005] 1 HKLRD 665). At §6, Ma CJHC said this:

“… On the first aspect, it is for the Court to look at the whole of the evidence with a view to determine whether parties have evinced an intention to create legal relationships one another. This will of course vary from case to case, but the following factors may offer some guidance:

(1) A payment on essential terms may indicate that a legally binding contract was intended. In the context of the lease, it may generally be said that such terms in the identity of the parties, the identity of the premises, the commencement and notion of the lease and the rent payable: see here Hill & Redman’s Law of Landlord and Tenant, Vol.1at paras. 910-920. However, it is important to bear in mind that just because they may be agreement on the matters, it does not necessarily follow that a legally binding contract has been created. The law of contract is not quite so mechanical…

(2) Another indication that the parties intended to contract one another is if there has been some performance, even partially, of the contract or in further evidence of it. In many ways, this is often the clearest indication of an intention to contract. And, in the present case, this factor is in my view decisive.”

48.  The Court of Appeal placed heavy reliance on the payment of the deposit and the giving of possession for fitting out works. These were regarded as performance which decisively proved the existence of a concluded contract. Ribeiro PJ did not agree to this approach and said this at §28:

“Such acts are no doubt consistent the existence of a contract but they do not prove its existence. They are no less consistent being acts done in anticipation of a legally binding agreement parties confidently expected to enter into but which never materialized … ”

49.  At §34, after reviewing a few English authorities on the conclusion of a binding contract, Ribeiro PJ went on to say this:

“the payment of a deposit and the giving of access for fitting out works are therefore generally equivocal acts. Contrary to what the Court of Appeal held, such conduct does not establish the existence of any concluded contract.”

50.  Lastly, at §35, Ribeiro PJ reiterated that it is plain that whether the parties intended to enter into a concluded contract is a matter to be looked at objectively, citing Kwan Siu Man v Yaacov Ozer (1997-98) 1 HKCFAR 324 at 354.

51.  Applying these principles to the evidence before this court, I am left with no doubt that the parties agreed to all the terms of the Oral Agreement and they were essential terms of the New Lease. There was no outstanding essential term pending further discussion. Indeed, Mr Leung suggested none in his pleaded case and his evidence.

52.  I find that, on the evidence viewed objectively, the Oral Agreement did exist and it was already a concluded contract.   

The CPO Issue

53.  There is no dispute that the Oral Agreement was not embodied in any written contract or memorandum signed by the parties. Section 3 of the CPO is, therefore, engaged and it provides as follows:

“(1)Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

(2)This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”

54.  It is noteworthy that the majority of the alleged acts of part performance of the Oral Agreement, namely, the Company’s completion of the Requested Works and making the New Unit available for the exclusive possession of Mr Leung as per the terms of the Oral Agreement, were not challenged at trial. The completion of the Requested Works was actually evidenced by documentary evidence in the form of photographs and receipt issued by the contractor of the Company.

55.  Mr Leung merely made a lame attack on the Company’s allegation that it had refrained from putting the New Unit on the market for lease by saying that there was no documentary evidence in support. I accept the evidence of Mr Po in this regard.

56.  Mr Leung further argues that the Requested Works were carried out by the Company on its own initiative and he had never made such request. I prefer Mr Po’s evidence on this factual issue. His evidence was collaborated by another entry in the Logbook for 7 July 2016 by which Mr Po outlined the requests of Mr Leung. Indeed, in cross-examination, Mr Leung agreed that he had mentioned these works to Mr Po. I am satisfied on the evidence that Mr Leung had full knowledge of and indeed procured the Requested Works to be undertaken by the Company for the purpose of the New Lease in pursuance of the Oral Agreement.

57.  Ms Wong invites this court to refer to Chan Yat v Fung Keong Rubber Manufactory Ltd. [1967] HKLR 364. There, the plaintiff and vendors had allowed the defendant and purchaser to install machinery in the premises to be sold and the defendant had in fact taken possession. Pickering J held that this was a sufficient act of performance, particularly also as the plaintiff had ceased to try to let the premises and turned all new enquirers away.

58.  I consider all the acts of part performance which I have found to have done by the Company. I am satisfied that they are, when considered in their surrounding circumstances, able to point, on the balance of probabilities, to some contracts and are consistent with the Oral Agreement: see Kingswood Estate v Anderson [1963] 2 QB 169 and Wakeham v MacKenzie [1968] 1 WLR 1175. I fail to understand why the Company would have done the said acts if the Oral Agreement had not been concluded.

59.  I am also satisfied that those acts could not be said to be merely introductory or ancillary to a contract. Mr Leung did not argue so. In respect of the Requested Work, the individual items may look trivial but when they were considered collectively and objectively, they did point to the existence of the Oral Agreement and the Company undertook them for the purpose of the same.

60.  Lastly, I am convinced that those acts of part performance must be such as would render it a fraud in Mr Leung to take advantage of the Oral Agreement not being in writing. Those acts are not so reversible and the Company would be prejudiced financially as a result.

61.  On the CPO Issue, I conclude that the Company’s acts of part performance of the Oral Agreement were proved on the evidence and they take the present case out of section 3(1) by virtue of 3(2) of the CPO. I hold that the Oral Agreement despite the lack of a written memorandum was enforceable.

The Repudiation Issue and the Relief Issue

62.  The Repudiation Issue and the Relief Issue should be conveniently dealt with together since the latter hinges on the former.

63.  Given his denial of the existence of the Oral Agreement, Mr Leung did not have a positive case on the Repudiation Issue in his pleadings.

64.  The Company’s pleaded case of the breach of the Oral Agreement as varied is that Mr Leung failed to take possession of the New Unit as tenant or paid monthly rent of HK$45,000 under the New Lease at all. It is pleaded that the Company accepted the repudiation of Mr Leung on or around 5 November 2016 and terminated the Oral Agreement. The Company makes a claim for 3 months’ rent under the New Lease (from 5 August to 5 November 2016), i.e. HK$135,000 as damages. Alternatively, the Company prays for damages to be assessed.

65.  I have no doubt that Mr Leung repudiated the Oral Agreement. He did not execute the Amended Tenancy Agreement by 17 July 2016 as promised and did not take up the New Lease. In fact, Mr Leung had long evinced a clear and unequivocal intention to repudiate the Oral Agreement before the commencement date of the New Lease. The Confirmation indicated his refusal to accept any contractual relationship between the Company and him apart from the Old Tenancy Agreement.

66.  Furthermore, according to the August Letter, on 29 July 2016, Mr Leung even requested to continue to stay at the Old Unit at a reduced monthly rent of HK$38,000.

67.  On 3 August 2016, Mr Leung sent a text message to Mr Po and thanked him for the offer in the Amended Tenancy Agreement. He alleged that he had destroyed it due to the non-approval of his housing allowance application by AMPCO. He further referred to the Confirmation and reiterated that there was no other agreement between them besides the Old Tenancy Agreement.

68.  I should add that in cross-examination, Mr Leung disclosed that in mid July 2016 he actually managed to find another flat for his family in the same district and he signed a preliminary agreement to rent the same at a lower rent. It is obvious that he would not take up the New Lease and perform the Oral Agreement.

69.  On the evidence, I hold that Mr Leung repudiated the Oral Agreement. However, I do not accept that his repudiatory breach was only confined to his failure to take up the New Lease on its commencement date and his failure to pay the new rent thereunder. By the Confirmation, Mr Leung unequivocally renounced the Oral Agreement. His refusal to execute the Amended Tenancy Agreement and his subsequent refusal to take up the New Lease are also a repudiatory breaches.

70.  It is trite that an innocent party is given the choice of election when he is faced by a repudiatory breach. He can either treat the contract as continuing, i.e. affirmation of the contract, or he can bring it an end, i.e. acceptance of the repudiation, see Chitty on Contracts (33^rd ed., 2018) Vol.1, p.1727 at para.24-002.

71.  Ms Wong reminds this court that in the absence of contractual provisions to the contrary, there is no duty on the innocent party to accept a repudiatory breach, either within a reasonable time or at all, and no question of reasonableness or mitigation arises, citing Diamond Jubilee Investment Ltd v Chan Yiu Chung Sidney [2010] 1 HKLRD 638 per Ma CJHC (as he then was) at §20 to support her proposition. She must be right.

72.  In my judgment, it must be clear to the Company that Mr Leung renounced the Oral agreement by his refusal to execute the Amended Tenancy Agreement and the Confirmation well before the commencement date of the New Lease.

73.  There is no evidence that the Company had ever offered to hand over the key to the New Unit to Mr Leung before 8 August 2016 so that Mr Leung could have possession of the same under the New Lease.

74.  I have reviewed the text messages exchanged between the parties after the Confirmation. Mr Po never demanded again that Mr Leung should sign and return the Amended Tenancy Agreement to the Company. He merely hoped that Mr Leung could locate the same on 3 August 2016 and on 8 August 2016, after being told that it had been destroyed, he highlighted that the Amended Tenancy Agreement bearing the chop of the Company carried legal effect and must be returned (交回) to the company.

75.  Two days later, the August Letter was issued. I note that it did not explicitly state any acceptance of repudiation and indeed it was written without any legal terminologies. At the end of this letter, it was stated that the Company had demanded for several times that the Amended Tenancy Agreement be returned (退回) to the Company (“the Demand”). On a fair reading of the August Letter as a whole, by the language used, the Company had already accepted the renunciation and repudiation of the Oral Agreement by Mr Leung by the Demand previously made. I do not accept that it had merely demanded for the return of the Amended Tenancy Agreement with the signature of Mr Leung appended thereto for the purpose of the Oral Agreement.

76.  It is trite that acceptance of a repudiation must be clear and unequivocal and inactivity or acquiescence will generally not be regarded as acceptance for this purpose: see Chitty on Contracts, supra, p. 1740 at para. 24-013.

77.  There is no direct evidence as to when the Demand was first made. The only evidence available to this court is that it was first made in writing by its text message sent to Mr Leung on 8 August 2016, the commencement date of the New Lease (the Old Lease expired on 7 August 2016).

78.  In the circumstances, I hold that the Company accepted the repudiation of the Oral Agreement by the Demand made on 8 August 2016 or the August Letter at the latest.

79.  Before the acceptance of the repudiation, the Oral Agreement was still in force and the New Lease should commence on 8 August 2016. The Old Deposit should be converted into the New Deposit. In its pleadings, the Company accepts that only HK$90,000 out of the Old Deposit should be kept by the Company as New Deposit due to the reduction of the monthly rent under the New Lease and Mr Leung is only entitled to a refund of HK$2,000 subject to set-off of any damages payable to the Company.

80.  For the New Deposit, the Company relies on the forfeiture clause in Clause 6(b) of the Old Tenancy Agreement, which was agreed to be incorporated in the New Lease under the Oral Agreement. By reason of the repudiation of the Oral Agreement, the Company says that it is entitled to forfeit the New Deposit without prejudice to any right of action in respect of the breach.

81.  I agree that the Company is entitled to forfeit the New Deposit in the sum of HK$90,000 due to the repudiation of the Oral Agreement on the part of Mr Leung.

82.  The evidence of Mr Po is that the Company had no idea of Mr Leung’s background and feared that Mr Leung would cause trouble to the Company by the use of the 1^st Tenancy Agreement and the Amended Tenancy Agreement already executed by the Company. Therefore, the Company only, in mitigation of its loss, offered to let the New Unit through estate agents in early November 2016.

83.  On 30 November 2016, the Company signed a tenancy agreement in respect of the New Unit with another tenant and the lease took effect on 1 December 2016 for a term of two years. The monthly rent was HK$49,000, much higher than the new rent under the New Lease.

84.  I do not accept the explanation of the Company that it had to wait until November to place the New Unit onto the leasing market again. I do not think that its fear is justified and in any event it could be dispelled by appropriate legal actions. I find that the loss of rental income for the whole three months was self-induced and the causal link was broken. Mr Leung should not be held entirely responsible for the same.

85.  The Company managed to find a new tenant within less than a month. I do not have any reason to disbelieve that it could have found an alternative tenant in August before the start of school year had it made an effort to do so, particularly given Mr Po’s evidence that the Building was located in a reputable school area and it attracted many parents with schoolchildren. 

86.  Even if this court allows the Company a month’s time to look for a new tenant after its acceptance of the repudiation, I am not satisfied that in the absence of direct evidence, there was any actual loss of rental profit during that period in light of the more profitable lease obtained by the Company shortly afterwards.

87.  In the premises, the Company has failed to prove actual damage as a result of the repudiation and is entitled only to nominal damages. I believe the sum of HK$500 should be adequate as nominal damages in the circumstances.

88.  The conclusions above should be sufficient to resolve the live issues between the parties arising from their pleadings. I have not dealt with all the contentions of Mr Leung. I do not believe that those contentions which I have not specifically dealt with here have any bearing on the core issues.

89.  I should add that Ms Wong in her opening submissions very wisely and reasonably abandoned certain contentions or claims in the pleadings such as the costs for the Requested Works.

Conclusion and Order

90.  By reason of the foregoing analysis, I find that the Oral Agreement existed and was enforceable. Mr Leung repudiated the Oral Agreement and after acceptance of the repudiation, the Company is entitled to forfeit the New Deposit and to recover damages but it failed to prove the latter. This court can only allow the Company an award of nominal damages in the sum of HK$1,000.

91.  The claim of Mr Leung should be allowed only to the extent of HK$1,000. The New Deposit and the nominal damages have to be deducted from the Old Deposit.

92.  The Company is entitled to retain HK$90,000 as forfeited deposit under the New Lease pursuant to the Oral Agreement. Its counterclaim is allowed only to the extent of HK$1,000 as nominal damages for the repudiation of the Oral Agreement by Mr Leung. It has to return the balance of HK$1,000 to Mr Leung.

93.  Finally, on the issue of costs, each party has succeeded in their respective claims to a very limited extent. I am aware that the Company managed to avoid a full refund of the Old Deposit while Mr Leung was able to resist a claim for substantial damages. Both parties have over-reacted in this matter in my view and this litigation could have been avoided or at the very least be conducted in a much more economical manner. In my judgment, in the circumstances of this case, the fairest order that I should make is no order as to costs. I make this costs order nisi accordingly. Absent any application to vary this order nisi should be made by summons within 14 days from the date of the Judgment, it will become absolute.

94.  It remains for me to thank Ms Wong for her impressive effort and fair submissions.