THE WING ON PROPERTIES AND SECURITIES CO LTD v. WAVE FRONT ENTERPRISE (HK) LTD

HCA380/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

ACTION NO. 380 OF 2005

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D E C I S I O N

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Introduction

1.  There are two appeals to be dealt with together.  The plaintiff is the owner of Causeway Bay Plaza I.  The defendant is its tenant of two shop units on the ground floor of the plaza.  By the statement of claim endorsed on the writ of summons, the plaintiff claims possession of the shops and payment of mesne profits or, alternatively, damages.

2.  The first appeal is against an order of Registrar C Chan made on 25 May 2005 for interim payments to be paid by the defendant under Order 29, Rule 12 of the Rules of the High Court.  The second appeal is against the summary judgment for possession and mesne profits given by Master Au Yeung on 9 June 2005.

Background

3.  In March 2003, the defendant intended to lease the shops.  It served an offer letter dated 15 March 2003 on Lai Sun Development Limited.  The plaza was then owned by Lucky Strike Investment Limited (“Lucky Strike”), a subsidiary of Lai Sun.  The offer letter was served through the defendant’s estate agent, Master Dragon Consultancy Limited (“Master Dragon”).  The offer letter set out a term of three years commencing from 1 April 2003 with an option to renew for a further two years.  The rental was at $118,000 per month with the option period at market rent.

4.  The offer from Master Dragon was not accepted.  Instead, Lai Sun Real Estate Agency Limited (“Lai Sun”) on behalf of Lucky Strike provided the defendant with a fresh offer letter of nine pages which included a sketch of the ground floor of the plaza and a statement of account for payment to be made to Lucky Strike if the offer should be accepted. 

5.  One Mr Edward Lee of Master Dragon made an affirmation for the defendant on 20 June 2005 and said that he picked up this offer letter from Lai Sun on 13 or 14 March 2003.  He found a typographical error in this offer letter in that it stated the three-year period would end on 31 March 2005.  The correct expiry date of the term should be 2006, and he duly corrected it.  In addition, there was a clause 17 which provided for a personal guarantee by a major director of the defendant to secure the defendant’s performance of the tenancy.  Mr Lee said he also deleted it with the consent of one Mr Ken Lam of Lai Sun.  Regarding this deletion, Mr Ken Lam said in an affirmation filed on 29 June 2005 that he had not consented to it as it was a matter for the management of Lucky Strike.  Apart from correcting the typo and deleting clause 17, there was no other change, and the letter was signed by a director of the defendant, Mr Peter Chow, on 19 March 2003.  I also note that the evidence of the plaintiff that the correction was initialled by another director of the defendant, Mr Fong Wai-shum, and the deletion was initialled by Mr Peter Chow. 

6.  The relevant clause in this letter is No. 15(n) which reads:

“Redevelopment and Sale

Notwithstanding anything to the contrary hereinbefore contained, if at any time during the Tenancy hereby created, the Landlord shall enter into a contract for the sale of the said building or of any part thereof which shall include the said premises and/or if the Landlord shall resolve to redevelop the said building or any part thereof whether wholly by demolition and rebuilding or otherwise, or partially by renovation, refurbishment or otherwise (which intention so to redevelop shall be sufficiently evidenced by a copy of a Resolution of its Directors certified to be true and correct by its Secretary) then in either of such events the Landlord shall be entitled to give not less than six (6) months’ notice in writing during the tenancy hereby created terminating this Agreement and immediately upon the expiration of such notice this Agreement and everything herein contained shall cease and be void and neither party shall have any claim against the other in respect thereof, but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of any of the covenants restrictions stipulations or conditions herein contained “Demolish” and/or “rebuild” for the purpose of this Clause shall mean the demolish and/or rebuilding of the while (sic) of the said Building and whether or not any part thereof is to be rebuilt or reconstructed in the same or any other manner. “Refurbish” may or may not include demolition of the building or any part thereof.”

7.  After this signed offer letter was returned to Ken Lam, he submitted it to a director of Lucky Strike, Mr Julian Poon, for approval of the deletion of clause 17 and acceptance by Lucky Strike.  After this offer was accepted by Lucky Strike, Messrs Lo & Lo, solicitors of Lucky Strike, sent a letter dated 10 May 2003 to Master Dragon, enclosing a tenancy agreement and a set of board minutes for execution by the defendant’s board of directors.  Lo & Lo asked for the return of the duly-executed documents within 14 days.  The board minutes read:

“Reports to the Company
The Chairman reported to the meeting certain proposed transaction(s), more particularly described in the Schedule below which the management of the Company has been negotiating on behalf of the Company. After due consideration, it was unanimously resolved that: -
1.	the proposed transaction(s) be approved.
2.	documents prepared by Messrs. Lo & Lo embodying the terms of the proposed transaction(s) be approved.
3.	Those of the said documents be signed by for and on behalf of the Company.”

8.  Under the schedule of the minutes and the heading “Nature of transaction,” it is stated that the defendant shall enter into a tenancy agreement of the shops with the landlord for 36 months from 1 April 2003 to 31 March 2006 at the rental of $118,000 per month with an option to renew for a further term of 24 months from 1 April 2006 to 31 March 2008 at the prevailing market rent, and the defendant shall enter into an agreement with the landlord for such tenancy.

9.  The defendant’s board duly convened, and the meeting as chaired by Mr Peter Chow duly resolved in terms of the minutes though the date of the meeting was wrongly stated to 17 March 2003.  The tenancy agreement was also signed by Peter Chow and his signature was witnessed by Edward Lee.  Clause 6.1 of the tenancy, which is very close to clause 15(n) in Lai Sun’s offer letter, provided:

“6.1  Sales and Redevelopment
If at any time during the term herein created the Landlord shall resolve to demolish, rebuild or refurbish the said Building or any part thereof (which intention to demolish rebuild shall be sufficiently evidenced by a copy of a Resolution or (sic) its Board of Directors certified to be true and correct by its Secretary or a Director) or shall have entered into any agreement for sale and purchase of the said Building or any part thereof which included the said premises then in any of such events the Landlord shall be entitled to give no less than six months’ notice in writing to terminate this Agreement and immediately upon the expiration of such notice this Agreement shall be terminated without any damages, costs, claims or expenses resulting therefrom but without prejudice to the rights and remedies of either party against the other in respect of any antecedent claim or breach of any of the covenants restrictions stipulations or conditions herein contained “Demolish” and/or “rebuild” for the purpose of this Clause shall mean the demolition and/or rebuilding of the whole of the said Building or a substantial part or parts (but not necessarily a major part) thereof whether or not including any main walls exterior walls or roof of the said premises and/or the said Building and whether or not any part thereof is to be re-built or reconstructed in the same or any other manner. “Refurbish” may or may not include demolition of the Building or any part thereof.”

10.  The tenancy duly signed and the board minutes duly certified were returned to Lai Sun in due course.  On 23 October 2003, the plaintiff purchased Causeway Bay Plaza I from Lucky Strike.  On 30 August 2004, the plaintiff’s board made a resolution to refurbish the ground floor, first floor and second floor of the building.  On the same day, the plaintiff, pursuant to Clause 6.1 of the tenancy, served a 6 months’ notice to quit on the defendant and the notice expired on 28 February 2005. 

11.  The refurbishment intended by the plaintiff was substantial.  The cost as expected in August 2004 was $10 million.  Part of the works was to convert the shops let to the defendant into a new passageway leading into the shopping arcade.  An authorised person had been engaged to design the refurbishment works and to seek approval and consent to commence with the works from the Building Authority. 

12.  After the notice to quit had been served on the defendant on 30 August 2004, the defendant on 30 September 2004 by its then solicitors, Messrs Sanny Kwong & Henry Lo, wrote to the plaintiff and complained that the plaintiff had only given the defendant exactly 6 months’ notice when the tenant would expect a longer period of notice.  The letter further pleaded that the effect of the early termination was disastrous to the defendant as all fitting-out costs would be lost.  The letter then asked the plaintiff for a proposal to deal with the defendant’s distress.  The plaintiff did not reply to this letter.

13.  On 18 January 2005, Mr Henry Lo of the defendant’s then solicitors sent an e-mail to the plaintiff’s estate agent, Messrs Cushman and Wakefield, requesting for a meeting with the plaintiff.  That also did not result in anything fruitful.

14.  On 25 February 2005, which was three days before the expiry of the notice to quit, the defendant engaged a new firm of solicitors, Messrs Kevin Kong & Co., which wrote to the plaintiff on a new basis.  The letter stated among other things:

“Throughout the conduct of negotiations for the lease of the above premises between our clients and Lai Sun Real Estate Agency Limited as agent for and on behalf of Lucky Strike Investment Limited (“Lucky Strike”), the former registered owner of the said premises, the provisions under Clause 6.1 of the Tenancy Agreement dated 13th June 2003 have never been agreed by nor brought to the attention of our clients. The said Agreement was a standard form of tenancy agreement adopted by Lucky Strike. According to the said agents for Lucky Strike, the said Agreement contained usual conditions for tenancies for commercial premises, and that no unusual or unreasonable conditions existed therein. Relying on such representation, our clients did not read the terms of the said Agreement nor sought independent legal advice before signing the same. In fact, the said Clause 6.1 is unusual, unreasonable and oppressive. It defeats the whole purpose of the fundamental terms of the subject tenancy as described herebelow (sic).

Our clients agreed to lease the said premises for a term of three years commencing from 1st April, 2003 at the monthly rent of HK$118,000.00 with an option to renew the tenancy in favour of our clients for a further term of 24 months commencing on the 1st day of April, 2006 at the prevailing market rent as at the commencement of the renewed term. The said Clause 6.1 completely defeats the purpose of these fundamental terms of the subject tenancy, and Lucky Strike well knew that our clients would not assent to it if brought to their attention and did not assent to the provisions of the said clause. The said Clause 6.1 contradicts the over-all purpose for which the said Tenancy Agreement is entered into by our clients. If the said clause is to take effect, it means that after our clients have made great investment in their proposed business, including the expending of substantial costs in decorating the said premises, the landlord (Lucky Strike, as from 23 October 2003 yourselves) can by a resolution passed arbitrarily to refurbish any part of the Causeway Bay Plaza I including the subject premises, serve a 6 months’ notice in writing shortly after the commencement of the tenancy on our clients to terminate the tenancy, and our clients will have no recourse against the landlord; or when the market rent rises, the landlord can by a similar resolution serve the said notice to termination on our clients, in an attempt to re-let the said premises at a higher rent. The said Clause 6.1 is completely unconscionable and unenforceable against our clients.”

15.  Lo & Lo on 28 February 2005 replied to Kevin Kong & Co., and the relevant parts of the reply are:

“We note the argument put forward by you in your letter and the objection to our client’s termination of its tenancy in accordance with the tenancy agreement raised. It consists of two points as follows: -
(1)	your client was not aware of the inclusion of the early termination clause in the tenancy agreement not until your client has been served with the notice to quit that your client’s this year will be terminated on 28th February 2005 in accordance with Clause 6.1 of the tenancy agreement (‘the Clause’); and
(2)	your client has never agreed to the Clause which was not brought to your client’s attention when your client signed on the tenancy agreement.
We are instructed that it is totally not correct for what you have stated in your letter. In the contrary, we are instructed that your client knew the existence of the Clause to be included in the tenancy agreement since it was one of the terms as contained in the offer letter made by your client to the former owner. We would like to enclose the following documents for your reference:-
(a)	a board resolution of your client dated 17th March 2003; and
(b)	an offer letter from your client to Lucky Strike Investment Ltd., the former owner of the building dated 19th March 2003. This offer letter also showed that the offer was received by the agent of the former owner on 27th March 2003 and accepted by the said agent on behalf of the former owner on 28th March 2003.
From the resolution of your client, it is evidently clear that the board of directors of your client had considered and approved the terms and conditions as embodied in the offer letter and Mr Chow Kam Hung Peter, the chairman of the board of directors, was authorised by your client to sign on the offer letter. Two days after the passing of the board resolution, Mr Peter Chow of your client signed on the offer letter and sent the offer letter to the agent of the former owner. We note that on the offer letter, Mr Peter Chow initialled on each page of the offer letter showing that he agreed to each and every condition stated therein. We also note that the tenancy agreement prepared subsequently has embodied the terms as stated in the offer letter made by your client.”

Appeal Against Summary Judgment

16.  The defendant did not move out after the expiry of the notice to quit.  The plaintiff then started this action against it.  On 24 March 2005, the plaintiff issued a summons for summary judgment.  The plaintiff also filed a supporting affirmation by one Mr. Steven Leung.  Mr Leung said that all other tenants of the parts of the plaza to be refurbished had moved out and work had started.  However, the shops as occupied by the plaintiff and the areas adjacent thereto could not be worked on and the refurbishment could not be completed.

17.  In order to show that Clause 6.1 was not an unusual clause but a common provision that can be found in tenancy agreements of reputable shopping malls, Mr Leung also produced copy tenancy agreements for the New Town Plaza Phase III in Sha Tin, the Landmark Atrium in Central, East Point City in Tseung Kwan O, Toyo Mall in Tsim Sha Tsui, and Causeway Bay Plaza II in Causeway Bay.  These tenancies all contained break clauses that permit the landlords to issue notice to quit to terminate the tenancy in the event of sale, redevelopment or refurbishment.  Incidentally, there were franchisees of the defendant which operate in East Point City and Toyo Mall though their tenancies were not registered at the Land Registry and thus not produced.

18.  The defendant initially relied on an affirmation by its solicitor, Mr William Au Wing-lun, but Mr Au only gave hearsay evidence which was not all accurate.  There was then an affirmation by Mr Peter Chow filed on 17 June 2005.  This affirmation corrected the affirmation of Mr Au and provided more firsthand details in support of the defence case.  It was not available at the hearing before Master Au Yeung and was only used before Deputy High court Judge Fung when the defendant asked for a stay of execution.

19.  The salient matters deposed to by Mr Chow in his affirmation are: 

“	4.	Upon the request of Lai Sun as agent for Lucky Strike, I on behalf of the Defendant signed upon a standard offer letter adopted by Lucky Strike provided to it by Lai Sun. A responsible officer of Lai Sun by the name of Mr Ken Lam represented to the Estate Agent of mine by the name of Edward S. H. Lee who is under the employment of Master Dragon Consultancy Limited on behalf of the Defendant that the terms and conditions of the standard offer letter of Lucky Strike were usual conditions in respect of leases of commercial premises, and the same contained no unusual or unreasonable conditions. It was my said Estate Agent Mr. Lee who initialed Clause 3 on page 1 of the offer letter and corrected 2005 to 2006 and deleted and initialed Clause 17 on page 7 of the offer letter. Relying on such representation, I on behalf of the Defendant signed upon the said offer letter provided by Lai Sun on 19th March 2003 and was brought to me in Macau by my said Estate Agent. There was no discussion whatsoever of any so-called 6 months break clause by Lai Sun to my said Estate Agent. I further say and believe the Plaintiff is in no position whatsoever to comment and/or speculate as to how the Tenancy Agreement was signed. If there was such a clause explained to me, I would not have agreed to it. As the Tenancy Agreement was urgently brought to me in Macau to sign and it was to be sent back immediately, I had little or no time to read and consider the clauses before signing. I verily believe that I was under the pressure of time to sign the Tenancy Agreement inter alia. As a result, I did not have time to fully consider the contents thereof. Indeed I recall I had about 15 minutes to consider the same before the Tenancy Agreement was sent back. In fact, the said offer letter contains inter alia a condition (hereinafter referred to as “the Redevelopment Condition”) which contradicts the Basic Terms, …
	5.	The said representation by Mr Kent Lam of Lai Sun as agent for Lucky Strike constitutes a misrepresentation. Relying on such representation I on behalf of the Defendant did not read the terms and conditions and did not fully understand the full effect set out under item 15 especially item 15(n) of the said offer letter including the Redevelopment Condition which I on behalf of the Defendant would certainly not have agreed to the same. Upon the request of Lai Sun, I on behalf of the Defendant initialed upon each and every bottom page of the said offer letter. The Redevelopment Condition is void and unenforceable against the Defendant on the ground that the Defendant had not assented to the said condition, that the said condition contradicts the fundamental terms based on which the Defendant agreed to take up the subject lease of the said Premises from Lucky Strike, and that the said condition is unconscionable …
	6.	On 13th June 2003, a formal Tenancy Agreement (hereinafter referred to as ‘the said Tenancy Agreement’) in respect of the said Premises in a standard form provided by Lucky Strike containing (inter alia) the fundamental conditions referred to in paragraph 4 above was entered into between Lucky Strike as the Landlord and the Defendant as Tenant. Lucky Strike did not bring to the attention of the Defendant the existence in the Tenancy Agreement of the Redevelopment Condition, namely, Clause 6.1 thereof, which is an unusual and unreasonable condition, and the Defendant had not assented to the Redevelopment Condition therein, and is not bound by the same. In deed the said Clause was not even mentioned on the 1st page of the Tenancy Agreement but obscured of on page 18 of the Tenancy Agreement.
	7.	Even if the Redevelopment Condition were binding on the Defendant, which is expressly denied by the Defendant, in order to give business efficacy to the said Tenancy Agreement, there is implied a condition that the landlord is only entitled to exercise the right to serve a six months’ notice to terminate the said Tenancy Agreement pursuant to Clause 6.1 thereof on condition that there exists a genuine and mandatory need and requirement for redevelopment or refurbishment of the said Building or the relevant part or parts thereof (including the said Premises), namely, a requirement to demolish or repair the same pursuant to an order of the Building Authority issued under the Buildings Ordinance Cap. 123. …
	8.	It is submitted on behalf of the Defendant that the Plaintiff can always pass a further resolution to reverse its earlier decision to refurbish the said Levels, and to re-let the same (including the said Premises) forthwith at higher rentals, since the rental market of retail shop premises in the HKSAR has escalated to a considerable extent since the commencement of the subject tenancy, when the HKSAR was suffering from the attack of SARS. … Chow Tai Fook Jewellery still remain and operate on the ground floor and a Chinese Seafood and Roast Duck Restaurant still remain and operate on the 4th floor of the said Premises. … There is therefore no urgent need to redevelop or refurbish the said Premises and Site as suggested by the Plaintiff. The Site was not in a derelict or dilapidated state. Indeed, the Plaintiff has not produced before nor exhibited any photographs showing that the said Premises were in urgent need for refurbishment.”

20.  The defences as put forward are thus:

(1)	the defendant signed the offer letter and the tenancy agreement not being aware of the break clause because of the plaintiff’s misrepresentation;
(2)	the tenancy agreement was in standard terms and the break clause, which was unusually onerous and unreasonable, had not been brought to the defendant’s attention and, hence, was not incorporated into the tenancy agreement;
(3)	there was an implied term that the break clause could only be invoked when there was an order given by the Building Authority under the Buildings Ordinance that the plaza had to be refurbished; and
(4)	there was no genuine need for refurbishment.

21.  On the defences based on misrepresentation and non-incorporation of an unusually onerous and unreasonable term, I also refer to the affirmation by the defendant’s estate agent, Mr Edward Lee, filed on 20 June 2005.  Mr Lee said: 

“	(2)	Sometime around 13th to 14th March 2003, I went up to Lai Sun at Causeway Bay Plaza I at Nos. 489 Hennessy Road, Hong Kong to meet Mr. Ken Lam to pick up the offer letter provided by Lai Sun for the execution by the Defendant. With the consent of Mr. Ken Lam, I crossed out clause 17 on page 7. I also made correction from 2005 to 2006 on clause 3 on page 1 concerning the Term of Tenancy. As to the rest of the clauses, Mr. Ken Lam represented to me that this is the standard form and contained no special unusual or unreasonable terms. I brought this offer letter to Macau on 19th March 2005 for Mr Chow Kam Hung Peter to sign in my presence and brought back the offer letter to Lai Sun in Hong Kong. To my understanding, what the Defendant wanted is a five year tenancy in order to satisfy their requirement under the Franchise Agreement. In my offer letter to Lai Sun dated 15th March 2003, the Lease Term is therefore 3 years fixed with an option to renew for two years.
	(3)	In early June 2003, I went up again to Lai Sun at Causeway Bay Plaza I to see Mr. Ken Lam to pick up the Tenancy Agreement for the execution by the Defendant. I brought the Tenancy Agreement again to Macau for the execution by the Defendant and signed as witness to Mr Chow Kam Hung Peter’s signature. This was done in a hurry and I had to bring back the Tenancy Agreement on the same day to Lai Sun.”

22.  I think Mr Lee made an error when he said he picked up the tenancy agreement from Mr Ken Lam as it was sent to him by Lo & Lo under cover of their letter of 10 May 2003.

23.  Mr Ken Lam also made an affirmation to respond to Mr Lee’s allegations.  He said:

“	(3)	In about March 2003, Mr Edward Lee introduced the Defendant to me that the Defendant was interested to rent the subject property and a letter from Master Dragon Consultancy Limited dated 15th March 2003 was subsequently received.
	(4)	Upon receipt of the letter, I sought approval from the management of Lucky Strike. After approval was given, I then prepared an Offer Letter setting out the terms and conditions for leasing out the subject property, which terms and conditions (including the provision in clause 15(n) there) were the standard basic terms and conditions adopted by Lai Sun Group in offer letters for leasing-out of commercial/shop premises. The Offer Letter was ready on or about 16th or 17th March 2003 and I gave a call to Mr Edward Lee and asked him to pick up the Offer Letter from my office since Mr Edward Lee was the leasing agent of the Defendant.
	(5)	I cannot recall on which date I saw Mr Edward Lee in my office for him to pick up the Offer Letter. However, when I handed over the Offer Letter to him, he did read over the contents of the Offer Letter. I told him that all the terms and conditions in the Offer Letter were the standard terms adopted by the Lai Sun Group. I clearly and distinctly told Mr Edward Lee that the terms and conditions upon which Lucky Strike was prepared to lease the subject property to the Defendant was contained in the Offer Letter. Mr Edward Lee then took away the offer letter.  I cannot recall whether Mr Edward Lee had made the amendment to the Offer Letter in my presence since the incident happened over two years ago. However, even if Mr Edward Lee had deleted Clause 17 of the Offer Letter in front of me, I did not have authority to consent to it, therefore I would not have agreed to such deletion. Every amendment to the terms and conditions of the Offer Letter would have to be approved by the management of Lucky Strike.
	(6)	On about 27th March 2003, Mr Edward Lee handed back to me the offer letter with a cheque for the deposit and half of the stamp duty. I signed on the Offer Letter to acknowledge receipt of the cheque on behalf of Lai Sun. On the Offer Letter, there were amendment at the typing mistake at page 1 and then Clause 17 at page 7 regarding the requirement of the personal guarantee from the director of the Defendant was crossed out. Since there was the amendment to terms and conditions of the Offer Letter with the deletion of Clause 17, I had no authority to approve the amendment and I needed to obtain the approval from the director of Lucky Strike. Therefore, in the memorandum to Mr Julian Poon, a director of Lucky Strike, prepared by me, I specifically drew his attention to the fact that the tenant did not agree to give director’s guarantee, and sought Mr Poon’s approval to the amendments to Clause 17, so that if he approved of the same he could sign the Offer Letter. …”

Misrepresentation

24.  Though Mr Edward Lee alleged that Mr Ken Lam had told him that Mr Lam’s offer letter had no special, unusual or unreasonable terms, it is obvious that Mr Lee himself had read through the offer letter and he had done so with care.  Otherwise, he would not have been able to spot the typo of “2005” and corrected it to “2006” and also to discover the need to cross out Clause 17.  In fact, he had not said in his affirmation that he had relied on Mr Lam’s representation and thus he did not read the letter.  Even if Mr Lee should have said so, it would not have sounded real because he would not be able to say why he could have spotted the typo and found the need to cross out Clause 17.

25.  Mr Lee also did not say that he had not explained the contents of the offer letter to Mr Peter Chow but had simply relayed to him the representation of Mr Ken Lam, and Mr Chow, in reliance of the misrepresentation, simply signed the letter without reading it.  As an estate agent acting for the defendant, Mr Lee would be in breach of his duty if he did not go through the terms of the landlord’s offer and explain the same to his client but simply relied on a representation of the landlord’s agent and allowed the client to commit to the terms.  Mr Lee did not say that he had behaved in such manner and I do not think he had so behaved.  I think the facts in this case make it clear that Mr Lee had gone through the offer letter with care and was aware of the existence of all the terms therein, including Clause 15(n).  I do not believe that there was any misrepresentation by Mr Ken Lam as alleged by Mr Lee.

26.  I further hold that even if there was the misrepresentation as alleged, the same had not affected Mr Lee and Mr Lee had not relied on it.  If Mr Lee, being fully aware of the terms in the offer letter, including Clause 15(n), should have chosen not to explain the same to his client but instead told his client that he had been told by the landlord’s agent that there was no unusual or unreasonable terms, then even if his client should have relied on the misrepresentation, the landlord would still not be liable for the same (see paragraph 6-032 of Chitty on Contracts, volume 1, 29th edition).

27.  I have said above that I do not believe that Mr Ken Lam had made the alleged misrepresentation and that even if he had made the misrepresentation, Mr Lee had not relied on it as he had read through the offer from Mr Lam.  I further say that even if Mr Ken Lam had made the alleged misrepresentation, Mr Edward Lee had not relayed it to Mr Peter Chow.  If he had, he would have said so in his affirmation.  Furthermore, it was unreasonable for Mr Lee to have done so as he was the defendant’s agent and had the duty to explain to the defendant the terms of the offer of which he was aware.  I do not think the defendant’s defence of misrepresentation by Mr Ken Lam, which had allegedly operated on Mr Peter Chow through Mr Edward Lee, is believable at all. 

28.  I must add that the delay in the appearance of this line of defence in the correspondence before action supports my conclusion that such is unbelievable.  I also say that I harbour a doubt on whether Mr Lee would have deleted Clause 17 of the offer letter without discussing it with Mr Peter Chow, but I do not think I need to come to any conclusion on this.

Incorporation of Term

29.  On the defence that the break clause was special, unusual and unreasonable and it had not been incorporated into the tenancy as the landlord had not brought it to the attention of the tenant, the defendant relies on Interfoto Picture Library Limited v Stiletto Visual Programmes Limited [1989] 1 QB 433.  The plaintiff in that case lent some transparencies to the defendant at a fee.  The delivery note accompanying the transparencies contained some conditions.  One of them imposed a hefty daily charge for retention of the transparencies beyond 14 days.  The English Court of Appeal held that if a contract contained a particularly onerous or unusual condition, the party seeking to enforce that condition had to show that it had been brought fairly and reasonably to the attention of the other party.  Since the plaintiff had done nothing to draw the defendant’s attention to the clause providing for the hefty daily charge, this clause had never become part of the contract of lending.

30.  The defendant also relies on a Canadian case called Tilden Rent -A- Car Company v Clendenning [83] DLR (3d) 400.  The defendant in this case rented a car from the plaintiff.  He signed a contract and elected to pay an additional premium for “collision damage waiver” which he understood to amount to full insurance against damage as he had been told by the plaintiff’s staff on previous occasions that this waiver provided “full non-deductible coverage.”  He was given the contract at the plaintiff’s office at the Vancouver airport and he signed it in the presence of the plaintiff’s clerk without reading it.  The face of the contract provided that there would be no waiver on violation of its provisions.  On the back of the contract was a term saying that the car should not be operated by any person who had consumed any intoxicating liquor (whatever be the quantity).  The defendant damaged the car.  Before that, he had consumed some alcohol but was not intoxicated and could properly control the car.  The plaintiff sued the defendant for damages and sought to argue that the waiver did not apply because the defendant had consumed some alcohol. 

31.  It was held on appeal that in a transaction such as a car rental contract where the plaintiff had advertised the speed and ease of the transaction, the plaintiff can be held to know that its customers did not really assent to the unusual and onerous printed terms that were not drawn to the customers’ attention and the plaintiff could not rely on those terms. 

32.  I think it is also helpful to refer to paragraph 12-015 of Chitty on Contracts which deals with onerous or unusual terms in standard-form contracts:

“	12-015  Onerous or Unusual Terms.
	Although the party receiving the document knows it contains conditions, if the particular condition relied on is one which is a particularly onerous or unusual term, or is one which involves the abrogation of a right given by statute, the party tendering the document must show that it has been brought fairly and reasonably to the other’s attention. “Some clauses which I have seen,” said Denning L.J., “would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.””

33.  The first issue to decide under this defence is whether the break clause is a particularly onerous or unusual clause.  Similar break clauses are found in the tenancies of shopping malls which I have referred to above.  The defendant has not produced any tenancy of any shopping mall that does not have similar clauses.  Furthermore, the practice of inserting such break clause has been referred to in leading textbooks, and I refer to paragraphs 17.285 and 17.292 of Woodfall’s Law of Landlord and Tenant.  On the evidence available, I do not think the defendant has made out a case that the break clause in question was particularly onerous or unusual in tenancies for shops in shopping malls.

34.  Secondly, and assuming that I am wrong above, I also consider whether the plaintiff has done enough to draw to the defendant’s attention the existence of the break clause.  In the light of my finding that Edward Lee had read the offer letter with care as his reading had enabled him to correct the typo and delete Clause 17, it is really not necessary for me to consider this issue as Edward Lee was aware of the break clause.

35.  Nevertheless, I would still express my view on this as I think the conclusion to be drawn from the facts is so obvious.  The offer letter was picked up by Mr Edward Lee on 13 or 14 March according to him, or on 16 or 17 March according to Mr Ken Lam.  It was signed by Mr Peter Chow on 19 March.  So there were a few days for Mr Edward Lee and/or the defendant to consider the terms of the letter.  If Peter Chow and Edward Lee should have arranged things in a manner that did not give Peter Chow a proper opportunity to read the terms in the offer letter, the plaintiff should not be blamed.

36.  For the tenancy agreement, Lo & Lo sent it to Mr Edward Lee’s firm and requested for its return within 14 days.  That was a very reasonable period and should have been ample for Mr Edward Lee and/or the defendant to consider the terms.  If the tenancy was again signed in a hurry, it was not the plaintiff which had created the haste.  Since the defendant was represented by its own professional estate agent, I do not think it was incumbent on the plaintiff to do anything more to draw the defendant’s attention to the terms in the offer letter or the tenancy than sending them to the defendant’s own professional agent and giving them time to read them.

37.  This is not one of those cases where the conditions are contained in tickets or receipts or that the consumer was asked to sign a contract thrusted upon him over the counter.  This defence therefore fails.

38.  In the course of submissions, the defendant’s counsel also argued that Mr Peter Chow appeared not to be able to understand English and the offer letter and tenancy agreement were in English, but Mr Chow never said he had any difficulty with these documents because they were in English.

Implied Term

39.  The law on when a term can be implied into a contract has been summarized by Lord Simon in B. P. Refinery (Westernport) Pty Ltd. v. President and Councillors and Ratepayers of Shire of Hastings (1978) 52 ALJR 20 (PC) at 26E:

“	Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express.  In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied:
	(1)	it must be reasonable and equitable;
	(2)	it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
	(3)	it must be so obvious that “it goes without saying”;
	(4)	it must be capable of clear expression;
	(5)	it must not contradict any express term of the contract.”

40.  I do not think the defendant’s case for an implied term can fit into the criteria set out above.  Clause 6.1 can operate effectively without implying the term sought by the defendant.  I also do not see why the break clause should only operate when the Building Authority has ordered refurbishment under the Buildings Ordinance.  If the landlord as the plaintiff here is desirous of refurbishing and renewing and/or upgrading the mall, I do not see why it cannot rely on the break clause to make available the mall for such purpose.  I do not think the landlord has to wait until the mall shall be in such dilapidation which would warrant an order under the Buildings Ordinance before it can carry out refurbishment work.  This defence therefore also fails.

No Genuine Intention to Refurbish

41.  The defendant has also argued that the plaintiff has no genuine intention to refurbish the shopping mall.  Counsel for the defendant in submissions also repeatedly emphasized that the exercise under the break clause was merely an attempt to evict the defendant so that the shops could be let out again at a higher rental as the market has gone up considerably. 

42.  The defendant further referred to the neighbouring shop which was occupied by Chow Tai Fook Jewellery and the 4th floor of the building which was occupied by a Chinese restaurant.  However, there is no dispute that there had been substantial refurbishment works for which scaffoldings had been erected.  Furthermore, many tenants had also vacated so that their premises were available for the refurbishment.  Indeed, it was the defendant’s case that the mall was in such appalling conditions that the plaintiff would have to pay it damages for its loss of business.  It used this argument of the plaintiff’s breach of tenancy to oppose the plaintiff’s application for interim payment and argued that such damages exceeded the rental or mesne profits that it had to pay the plaintiff.  This argument did not impress Registrar C Chan but it clearly shows that there was genuine and substantial refurbishment work which had been undertaken in the mall since the termination of the defendant’s tenancy.

43.  The plaintiff has also produced building plans prepared by an authorised person to show the details of the refurbishment which cover the shop units occupied by the defendant.  There is also a consent to commence works issued by the Building Authority.  The building plans also show that the shop occupied by Chow Tai Fook Jewellery was not covered in the refurbishment exercise.  Thus, Chow Tai Fook was not told to leave.  Regarding the 4th floor, it was not covered by the refurbishment at all.

44.  By reason of the above, I also rule that this defence of no genuine intention to refurbish has no merit.  The plaintiff may be able to obtain a higher rental after the refurbishment, but that is the whole purpose of refurbishing the mall.  I do not think that is a relevant consideration.

Unequal Bargaining Power

45.  I do not know how this defence can sit comfortably with the defences of misrepresentation and non-incorporation of unusually onerous term not brought to the defendant’s attention.  Regardless of this problem, I also do not think the defendant has made out any arguable defence on this ground.  There was no fiduciary relationship involved and the defendant did not let the premises as a consumer.  The letting was negotiated at arm’s length.  I cannot see any basis for this defence.

Undue Influence

46.  Counsel for the defendant in the supplemental written submissions also relied on undue influence exerted by Mr Ken Lam.  This assertion again lacks any underlying factual support.  The defendant had its own estate agent in negotiating for the tenancy. 

Renovation Completed

47.  On 15 August 2005, the defendant’s solicitor, Mr William Au, filed his 2nd affirmation exhibiting some photographs showing that all exterior renovation works had been completed and the scaffolding taken away.  Counsel then submitted that all renovation at the mall had been completed and there was no need for further works.  Thus, the plaintiff should not be allowed to have possession of the shops in question. 

48.  On 17 August 2005, Mr Steven Leung of the plaintiff filed his fifth affirmation to reply to Mr Au’s second affirmation.  Mr Leung said that because the defendant had refused to move, the plaintiff therefore proceeded with the refurbishment with some temporary changes which left out the works at the shops in question to be executed after the defendant had vacated from these units.  The plaintiff has also applied to the Building Authority for variation of the building works to cater for the temporary variation.  It was the plaintiff’s intent to continue with the variation work over these units once the defendant has moved out.  Mr Leung also produced some correspondence with the Buildings Department to prove the application to amend the building plans for the temporary variation.

49.  I have no ground not to believe the plaintiff that it will continue with the refurbishment in the units in question once the defendant has moved out.  Their original plan has a passageway built on the area where these units stand.  The need for the plaintiff to have a temporary change to their refurbishment plan was occasioned by the defendant’s wrongful refusal to move out.  The defendant cannot defeat the notice to quit by its wrongful refusal to move out and then argue that the refurbishment had been completed and there was no need for it to move out.  It is not for the defendant to dictate how and what sort of refurbishment the plaintiff should undertake in the mall.  The notice to quit has been validly served and the defendant’s tenancy has been terminated.  There is thus no merit in this very last point made on appeal.

50.  I also think that the defendant may be liable for the extra refurbishment costs incurred by the plaintiff.  However, the prayer for relief has already merged into the summary judgment and I say no more about it.

51.  I therefore dismiss this appeal against the summary judgment granted by Master Au Yeung.

Appeal Against Interim Payment

52.  Regarding the appeal against interim payment, the defendant’s argument was that the plaintiff had failed to maintain the mall as a first-class mall because of the refurbishment works.  The works were undertaken after the expiry of the notice to quit served on the defendant.  Since I have upheld the summary judgment, the defendant should have moved out from the premises after 28 February 2005.  If it should have done so, it would not have suffered the inconvenience created by the works.  As the defendant had wrongfully stayed in the premises as a trespasser, it cannot complain about the inconvenience.  I therefore dismiss this appeal as well.

Costs Order Nisi

53.  Finally, I also make an order nisi that the defendant do pay the plaintiff the costs of both appeals as well as all costs reserved.

54.  I also fix the hearing for gross assessment of these costs at 2.30 pm tomorrow which is Friday, 26 August 2005.  The plaintiff shall send the bill of costs for gross assessment, and I stress that it is not a detailed bill to be used before a taxing master and I expect that it should be in an abbreviated form, by fax or by hand to the defendant’s solicitors no later than 9.30 o’clock tomorrow morning, and the defendant’s solicitors shall advise me at the hearing of the disputed items, and I will resolve them at the hearing.