LUCKY HERO DEVELOPMENT LTD. v. WONG HOI MING

DCCJ 15792/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO.15792 OF 2000

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JUDGMENT

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INTRODUCTION

1. This is an action by a Landlord against its tenant for arrears of rent. The claim was for the period between 1st January 2000 and 30th November 2000 and for the sum of $54,219.00.

BACKGROUND

2. This case came to the District Court with a long and checkered pass. The agreed facts can be summarized as follows:

- When the Plaintiff purchased the premises in 1997, the Defendant had been a tenant for a while.

- The monthly rent was $4,929.00.

- The tenancy was verbal with no prohibition in subletting.

- The Defendant had subletted the premises to a Ms. Sze, since July of 1993.

- In July 1999, Ms. Sze told the Defendant that she wished to move out of the premises but her son, Mr. Chan, would continue to occupy the premise.

- In October 1999, the Defendant telephoned Mr. Cheung, supervisor of the Plaintiff, with the intention of terminating his tenancy.

- At the request of Mr. Cheung, the Defendant wrote a letter to the Plaintiff to indicate his intention.

- The Defendant gave Mr. Cheung's telephone number to Mr. Chan; Mr. Chan then contacted Mr. Cheung to negotiate a new lease.

- The Plaintiff and Mr. Chan could not come to agreement.

- The Plaintiff commenced proceedings against the Defendant, at the Court of First Instance, for possession and arrears of rent.

- The Defendant failed to defend and judgment was entered against him.

- Mr. Chan, as sub-tenant, applied for a stay of execution. Interim stay was granted pending hearing.

- After the hearing, Mr. Chan's application was dismissed and stay of execution was lifted.

- Mr. Chan appealed and the matter came before Cheung J.

- At the first day of the appeal, Cheung J. pointed out to solicitor for the Plaintiff that there was no statutory forfeiture in Part IV tenancies and the lack of any written tenancy agreement meant that the judgment in favour of the Plaintiff was in danger of being set-aside.

- Plaintiff's solicitor then switched to the surrender argument. The hearing was then adjourned.

- In the mean time, solicitor for the Plaintiff applied to amend the High Court Statement of Claim by adding surrender as an alternative claim for possession.

- Cheung J. allowed the appeal and gave leave for the Plaintiff to file amended Statement of Claim.

- The amended Statement of Claim was never filed.

- The Plaintiff withdrew the High Court action by Notice of Discontinuance dated 12th July 2000.

- The Plaintiff commenced a claim against the Defendant in the Small Claims Tribunal for arrears of rent; the period claimed was from 1st January 2000 to 31st August 2000.

- The claim at the Small Claims Tribunal was withdrawn because the Plaintiff could not provide a Form CR109.

- The Plaintiff obtained the required Form CR109; this claim was then commenced against the Defendant.

- On 23rd October 2000, the Plaintiff issued a Form CR 101, effectively terminating the Defendant's tenancy on 30th April 2001.

THE PLAINTIFF'S CASE

3. The Plaintiff alleged that the parties never reached an agreement for the Defendant to surrendered his tenancy. In the alternative, if there was such an agreement, it was subject to a condition that the Defendant could deliver vacant possession of the premises.

THE DEFENDANT'S CASE

4. In a telephone conversation on or about October 1999, the Plaintiff's representative Mr. Cheung, agreed to accept the Defendant's surrender of his tenancy. Mr. Cheung then negotiated the terms of a new tenancy agreement directly with Mr. Chan.

5. Upon acceptance of the surrender, the Defendant had nothing further to do with the premises or the relationship between the Plaintiff and Mr. Chan.

THE ISSUE

6. There was only one main issue in this matter: Whether the Plaintiff had accepted the Defendant's surrender of the premises on or about October 1999?

THE LAW

7. There are two types of surrender: express surrender and surrender by operation of law.

EXPRESS SURRENDER

8. The learned authors of Woodfall's Law of Landlord and Tenant (vol. 1) explained express surrender (in para. 17.017) as follows:

"No particular words are necessary to make a surrender if it sufficiently appear to be the intention of both parties that the term should immediately cease." (Emphasis added)

9. Whether there was an express surrender is a finding of fact based on evidence presented by the parties, the testimonies given by the Plaintiff's witness and the Defendant. In support of an express surrender, Defendant submitted two groups of evidence. First, the Defendant's testimony and second, the pleadings and other documents in the High Court action, the transcripts of the appeal hearing before Cheung J. and his Lordship's judgment (the "High Court Documents").

10. Defence Counsel submitted that since solicitor for the Plaintiff had in the High Court appeal hearing had: applied to amend the Statement of Claim to include an alternative claim of surrender and admitted in front of Cheung J. that there was an effective surrender; proved that there was in fact an acceptance of the Defendant's surrender.

11. I cannot agree with that argument. After reviewing all transcripts of hearings before Cheung J., it was clear that the issue was brought up because in the original Statement of Claim, solicitors for the Plaintiff had only pleaded forfeiture as basis for possession of the premises. It was correctly pointed out by Cheung J., that there was no statutory forfeiture in Part IV tenancies and there could not be any forfeiture clause in the lease since there was no written lease, the Plaintiff could not rely on forfeiture and the judgment must be set aside.

12. In effect, Plaintiff's solicitor had to desperately come up with an alternative argument to preserve his client's judgment. He submitted surrender as an alternative ground for possession.

13. My analysis is supported by the following: First, the fact that the words "假設" and "如果" was peppered throughout the solicitor's submissions to Cheung J. Second, in the draft-amended statement of claim, surrender was stated specifically as an alternative basis for possession. Third, the amended statement of claim, with surrender as an alternative ground for possession, was never filed into court. Fourth, transcript of the hearing dated 30th June 2000 (between line Q and R of the first page) clearly showed the Plaintiff's solicitor retreating from the argument of surrender.

14. Accordingly, it is my finding that the High Court Documents were irrelevant to the issue of whether there was an acceptance of the Defendant's surrender in the October 1999 telephone conversation.

15. The Defendant alleged that in the telephone conversation with Mr. Cheung in October 1999, Mr. Cheung was for the first time informed of the subletting and then immediately agreed to accept the Defendant's surrender.

16. I found that most unbelievable. In the Defendant's own testimony, the telephone call was very brief, only a few words were spoken, he did not have enough time to tell Mr. Cheung any details on: When the sub-tenant will vacate the premise? How much the subtenant was paying in rent? and Whether the Defendant kept any rental deposit? All of these must have been in Mr. Cheung's mind, specifically when, according to the Defendant, rental deposit was a point of contention between the parties.

17. Given the fact that this was the first time Mr. Cheung learned of the sub-tenancy, it will not be reasonable for him to then immediately agree to a surrender without seeking more information from the Defendant and then get instruction or approval from his superiors. Mr. Cheung after all, was only a low level supervisor in the Plaintiff's company. In fact, that was what Mr. Cheung did, he asked the Defendant to put his request in writing. The Defendant 's written notice was just that, a notice of surrender and not proof of an acceptance of the surrender by the Plaintiff.

18. All of the above lead me to conclude that in the October 1999 telephone conversation, Mr. Cheung never agreed to the Defendant's surrender. All Mr. Cheung did was to request the surrender notice be put into writing, so that he could seek approval or instruction from his superiors. There was no immediate agreement to surrender and therefore no express surrender.

SURRENDER BY OPERATION OF LAW

19. Woodfall's learned authors explained surrender by operation of law as follows:

"...This principal does not depend on the actual intention of the parties but on estoppel. A surrender by operation of law does not depend on the intention of the parties; it takes place independently, and even in spite of intention. The foundation of the doctrine is estoppel. There is no estopple by mere verbal agreement; there must be in addition to such agreement some act done which is inconsistent with the continuance of the lease....

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The conduct of the parties must be unequivocally, amount to an acceptance that the tenancy has ended. There must either be relinquishment of possession and its acceptance by the landlord, or other conduct consistent only with the cesser of the tenancy, and the circumstances must by such as to render it inequitable for the tenant to dispute that the tenancy has ceased." (Emphasis added)

20. In this case, the only action by the Plaintiff which may be considered as an unequivocal acceptance of termination of the Defendant' tenancy was Mr. Cheung's attempt to reach a new tenancy agreement with Mr. Chan. This effort was not successful. No agreement was ever reached.

21. One of the examples of acts considered not amounting to surrender by operation of law, given in Woodfall's (in para. 17.021), was:

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(a) the landlord attempted unsuccessfully to relet the premises;

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22. I have also carefully considered the combined effects of all of the Plaintiff's actions in this matter, I did not find them amounted to an indication of cesser of the Defendant's tenancy. Accordingly, I found that there was no surrender by operation of law.

JUDGMENT

(1) Judgment for the Plaintiff, for arrears of rent from 1st January 2000 to 30th November 2000, in the sum of $54,219.00;

(2) Interest on the aforesaid sum, at the judgment rate, from 17th November 2000 until payment; and

(3) Cost of this action including all costs reserved shall be to the Plaintiff, with certificate for counsel, to be taxed on a party/party basis, if not agreed.